Monetary Economics: Macro Aspects

Spring, 2008

Henrik Jensen
Department of Economics
University of Copenhagen

Course details and plans

Course details

The aim of the course is to offer an understanding of several aspects of money and the macro economy, thereby providing insights into how and why monetary phenomena and policy affect important macroeconomic aggregates such as output, consumption, inflation and unemployment. Moreover, focus will be on the characteristics of “good” monetary policymaking in the sense of assessing the advantages and disadvantages of various monetary policy strategies. To secure a firm foundation for the aspects covered, emphasis will be on rigorously formulated theoretical models. Economic intuition, however, is just as important as mathematical formalism. Although the curriculum will be mainly theoretical, the empirical relevance of the material will not be underplayed. Particular aspects to be covered include: money’s role in flexible-price general equilibrium models; money’s role with incomplete nominal adjustment; credibility problems in monetary policy; the importance of institutional frameworks for monetary policy; international monetary policy coordination; inflation targeting.

The curriculum will consist of a large part of Carl. E. Walsh (2003): Monetary Theory and Policy. Second Edition, The MIT Press, and a number of articles. (Link to Walsh's List of Typos in the book.)

Recommended qualifications: As some of the material requires a thorough understanding of macroeconomic general equilibrium models, it is a prerequisite to master economic theory at a level corresponding to David Romer (2006): Advanced Macroeconomics, McGraw-Hill. In particular, the chapter on the Ramsey model should be known (so if you have not taken the old Macro 3 in Spring 2007, you must familiarize yourself with this chapter). Alternatively, you must have taken Advanced Macroeconomics. One should therefore be familiar with basic intertemporal optimization, and analyses of static and dynamic systems with rational expectations.

Most importantly, one should not be afraid of mathematical rigor. At the end of the day it merely serves to create conclusions and policy implications that are internally consistent. Not a bad starting point for organizing your thoughts. And remember that it's the economics which is the important stuff; the math is just a helpful tool!

Assessment: Written 4-hour exam; closed book. Date: June 16.

The teaching language is English.


January 31: Preliminary course plan and reading list (pdf 15 Kb)


Old exam sets

Go here (opens new window) for the collection of previous exam sets and suggested solutions. Note that the exam in 2006 was "open book" and therefore slightly harder than the earlier exams. Hence, the exams in 2003, 2004, 2005 and 2007 are the most representative for the exam of this course.