“Monetary Economics: Macro Aspects” - Spring 2006
The Web Based Interactive Tutorial*

Henrik Jensen**
Department of Economics
University of Copenhagen


Welcome to homepage of the second coming of the course “Monetary Economics: Macro Aspects.” Since the lecture sequence had to be cancelled due to force majeur, I have decided to run the course in April and May as a project involving a Web Based Interactive Tutorial (WBIT). All students who began taking the lectures are invited to join this project, as it is the intention and hope that it will greatly facilitate your abilities to take the exam in June with success (you can, in principle, even start taking the course now).

What is a WBIT, and what can students expect from it? On this WBIT I will post a document on each of the eight subjects covered in the course. The contents will be based on lecture slides available from previous years' renditions of the course, but will be somewhat expanded. The documents will be posted on a weekly basis starting Monday, March 27. The main idea is to foster communication about the curriculum between you, the students, and me. In particular, you are strongly encouraged to pose questions and comments to these documents by sending me an e-mail. The question will then be posted (anonymously) along with the answer. I.e., it will take the form of a FAQ (Frequently Asked Questions) section pertaining to each subject of the course. You should therefore be able to get (almost) continuous-time online advice on the curriculum. Moreover, you are always welcome to come by my office; just make an appointment by e-mail (to be sure that I am there).

The exam is to be held on June 15. It will be a four-hour written exam, where any material may be brought along.

To recapitulate what the course is all about, I quote from the original homepage:

“The aim of the course is to offer an understanding of several aspects of money and the macroeconomy, 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; inflation targeting; transparency of monetary policy conduct; international monetary policy coordination.

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.

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 (2002): “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.”

Where to go on the WBIT:

Notes on the subjects in the curriculum and the associated FAQs

1. Does monetary policy matter for output?
2. Money’s role in flexible-price general equilibrium models
3. Money’s role with incomplete nominal adjustment
4. Rules versus discretion: Credibility problems (I)
5. Operating Procedures, Interest Rates and Monetary Policy
6. Monetary policy conduct in “New Keynesian” settings: Credibility problems (II)
7. Open-economy Aspects and Monetary Policy Coordination
8. Inflation Targeting

Miscellaneous

News

Curriculum, contact info, and formalities

General FAQ

Links
 


News

The Exam, June 15 (pdf file, 60 Kb).
Suggested answers and computations for June 15 exam (pdf file, 100 Kb).

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Curriculum, contact info, and formalities

The curriculum (pdf file, 18 kb) (edit May 4: Correction of page numbers concerning Chapter 6 in Walsh, 2003)

Logistics for Henrik Jensen:
    E-mail: Henrik.Jensen@econ.ku.dk
    Phone: +45 35 32 30 43
    URL: www.econ.ku.dk/personal/henrikj/
    Office location: Third floor in Studiegaarden, Studiestraede 6

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1. Does monetary policy matter for output?

Notes on this subject (pdf file, 113 kb)

FAQ on this subject:

No entries yet.

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2. Money’s role in flexible-price general equilibrium models

Notes on this subject (pdf file, 332 kb). I know this is a very large file, but it will be by far the largest set of notes posted here.

FAQ on this subject:

On the MIU model, superneutrality and the marginal rate of substitution between consumption and money (pdf file, 40 Kb).
On the MIU model, the marginal utility of consumption and marginal value of capital (pdf file, 53 Kb).
On the basic CIA model and long-run superneutrality (pdf file, 46 Kb).
 

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3. Money’s role with incomplete nominal adjustment

Notes on this subject (pdf file, 170 kb).

FAQ on this subject:

General questions about Lucas' misperceptions model (pdf file, 28 Kb).

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4. Rules versus discretion: Credibility problems (I)

Notes on this subject (pdf file, 162 Kb).

FAQ on this subject:

On the "enforcement equation" in the repeated game version of the Barro and Gordon model (pdf file, 47 Kb).

Link to H. Jensen (2003): " Explaining an Inflation Bias without Using the Word "Surprise" " (pdf file, 100 Kb).

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5. Operating Procedures, Interest Rates and Monetary Policy

Notes on this subject (pdf file, 200 Kb).

FAQ on this subject:

On the variable D, the duration of bonds (pdf file, 43 Kb).

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6. Monetary policy conduct in “New Keynesian” settings: Credibility problems (II)

Notes on this subject (pdf file, 159 Kb).

FAQ on this subject:

On the first-order conditions for the full commitment solution (pdf file, 53 Kb).

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7. Open-economy Aspects and Monetary Policy Coordination

Notes on this subject (pdf file, 163 Kb).

FAQ on this subject:

On the derivation of equation (6.20) (pdf file, 53 Kb).
Various "minor" questions (pdf file 58 Kb)

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8. Inflation Targeting

Notes on this subject (pdf file, 128 Kb).

FAQ on this subject:

On equation (2.13') (pdf file, 43 Kb).

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General FAQ

No entries yet.

List of typos in notes, June 8 (pdf file, 58 Kb).

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Links

Visit to Danmarks Nationalbank, May 19, 2006:
    Presentation by Anders Møller Christensen (pdf file, 305 Kb)
    Presentation by Jesper Berg (pdf file, 933 Kb)

The homepage of the 2005 version of the course can be found here. At the end of the current semester it will not contain more material (of relevance) than what can be found on this page. Also, the material here is intended to be more structured.

List of typos in Walsh (2003) (from Carl E. Walsh's homepage)

My own page with links to economists.

Lars Svensson's page with links to economists.

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Created March 27, 2006.
Last updated July 7, 2006.

*All material (except where noticed), © 2006 Henrik Jensen. All rights reserved. The material may be reproduced for educational and research purposes, as long as the copies contain this notice and are retained for personal use or distributed free.

**Warning/Guarantee: This page is launched and maintained exclusively on my own initiative in an attempt to make the best possible service to students wanting to take an exam in this course. I have not been pressed into doing this by anybody.