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Teaching/Monetary Economics/Readings
Monetary Economics · Course 06

Readings

Monetary theory, New Keynesian DSGE models and the evidence on policy transmission.

Readings are listed by session. Core textbooks for the whole course are listed at the end.

Lecture 1: Money, Inflation and Transmission: The Facts

  • Lucas, R. E. (2000), "Inflation and Welfare," Econometrica 68(2).
  • McCandless, G. and W. Weber (1995), "Some Monetary Facts," Federal Reserve Bank of Minneapolis Quarterly Review.
  • Christiano, L., M. Eichenbaum and C. Evans (1999), "Monetary Policy Shocks: What Have We Learned and to What End?" Handbook of Macroeconomics.
  • Ramey, V. (2016), "Macroeconomic Shocks and Their Propagation," Handbook of Macroeconomics.
  • Walsh, C., Monetary Theory and Policy, ch. 1.

Lecture 2: Money in General Equilibrium

  • Sidrauski, M. (1967), "Rational Choice and Patterns of Growth in a Monetary Economy," American Economic Review.
  • Lucas, R. E. and N. Stokey (1987), "Money and Interest in a Cash-in-Advance Economy," Econometrica.
  • Lucas, R. E. (2000), "Inflation and Welfare," Econometrica.
  • Walsh, C., Monetary Theory and Policy, ch. 2–3.
  • Galí, J. (2015), Monetary Policy, Inflation, and the Business Cycle, ch. 2 (appendix on money in the utility function).

Lecture 3: The Classical Monetary Model

  • Galí, J. (2015), Monetary Policy, Inflation, and the Business Cycle, 2nd ed., ch. 2.
  • Sargent, T. and N. Wallace (1975), "'Rational' Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy.
  • McCallum, B. (1981), "Price Level Determinacy with an Interest Rate Policy Rule and Rational Expectations," Journal of Monetary Economics.
  • Woodford, M. (2003), Interest and Prices, ch. 2.

Lecture 4: Price and Wage Setting

  • Galí, J. (2015), Monetary Policy, Inflation, and the Business Cycle, ch. 3 and 6.
  • Calvo, G. (1983), "Staggered Prices in a Utility-Maximizing Framework," Journal of Monetary Economics.
  • Erceg, C., D. Henderson and A. Levin (2000), "Optimal Monetary Policy with Staggered Wage and Price Contracts," Journal of Monetary Economics.
  • Nakamura, E. and J. Steinsson (2008), "Five Facts about Prices," Quarterly Journal of Economics.
  • Hazell, J., J. Herreño, E. Nakamura and J. Steinsson (2022), "The Slope of the Phillips Curve: Evidence from U.S. States," Quarterly Journal of Economics.

Lecture 5: The Basic New Keynesian Model

  • Galí, J. (2015), Monetary Policy, Inflation, and the Business Cycle, ch. 3.
  • Clarida, R., J. Galí and M. Gertler (1999), "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature.
  • Bullard, J. and K. Mitra (2002), "Learning about Monetary Policy Rules," Journal of Monetary Economics.
  • Woodford, M. (2003), Interest and Prices, ch. 4.
  • Adjemian, S. et al., Dynare Reference Manual (stoch_simul and the Blanchard–Kahn conditions).

Lecture 6: Optimal Monetary Policy

  • Galí, J. (2015), Monetary Policy, Inflation, and the Business Cycle, ch. 4–5.
  • Clarida, R., J. Galí and M. Gertler (1999), "The Science of Monetary Policy," Journal of Economic Literature.
  • Woodford, M. (2003), Interest and Prices, ch. 6–7.
  • Blanchard, O. and J. Galí (2007), "Real Wage Rigidities and the New Keynesian Model," Journal of Money, Credit and Banking.
  • Schmitt-Grohé, S. and M. Uribe (2007), "Optimal Simple and Implementable Monetary and Fiscal Rules," Journal of Monetary Economics.

Lecture 7: Policy Rules and Frameworks

  • Taylor, J. (1993), "Discretion versus Policy Rules in Practice," Carnegie-Rochester Conference Series on Public Policy.
  • Clarida, R., J. Galí and M. Gertler (2000), "Monetary Policy Rules and Macroeconomic Stability," Quarterly Journal of Economics.
  • Orphanides, A. (2001), "Monetary Policy Rules Based on Real-Time Data," American Economic Review.
  • Svensson, L. (1997), "Inflation Forecast Targeting," European Economic Review.
  • Vestin, D. (2006), "Price-Level versus Inflation Targeting," Journal of Monetary Economics.

Lecture 8: Monetary Policy in Small Open Economies

  • Galí, J. and T. Monacelli (2005), "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Review of Economic Studies.
  • Galí, J. (2015), Monetary Policy, Inflation, and the Business Cycle, ch. 8.
  • Calvo, G. and C. Reinhart (2002), "Fear of Floating," Quarterly Journal of Economics.
  • Gopinath, G. et al. (2020), "Dominant Currency Paradigm," American Economic Review.
  • Rey, H. (2013), "Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence," Jackson Hole Symposium.

Lecture 9: Financial Frictions and the Credit Channel

  • Bernanke, B., M. Gertler and S. Gilchrist (1999), "The Financial Accelerator in a Quantitative Business Cycle Framework," Handbook of Macroeconomics.
  • Gertler, M. and P. Karadi (2011), "A Model of Unconventional Monetary Policy," Journal of Monetary Economics.
  • Gertler, M. and P. Karadi (2015), "Monetary Policy Surprises, Credit Costs, and Economic Activity," American Economic Journal: Macroeconomics.
  • Gilchrist, S. and E. Zakrajšek (2012), "Credit Spreads and Business Cycle Fluctuations," American Economic Review.
  • Cúrdia, V. and M. Woodford (2010), "Credit Spreads and Monetary Policy," Journal of Money, Credit and Banking.

Lecture 10: The Zero Lower Bound and Unconventional Policy

  • Eggertsson, G. and M. Woodford (2003), "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity.
  • Christiano, L., M. Eichenbaum and S. Rebelo (2011), "When Is the Government Spending Multiplier Large?" Journal of Political Economy.
  • McKay, A., E. Nakamura and J. Steinsson (2016), "The Power of Forward Guidance Revisited," American Economic Review.
  • Bernanke, B. (2020), "The New Tools of Monetary Policy," American Economic Review.
  • Guerrieri, L. and M. Iacoviello (2015), "OccBin: A Toolkit for Solving Dynamic Models with Occasionally Binding Constraints Easily," Journal of Monetary Economics.

Lecture 11: Monetary–Fiscal Interactions

  • Leeper, E. (1991), "Equilibria under 'Active' and 'Passive' Monetary and Fiscal Policies," Journal of Monetary Economics.
  • Sargent, T. and N. Wallace (1981), "Some Unpleasant Monetarist Arithmetic," Federal Reserve Bank of Minneapolis Quarterly Review.
  • Woodford, M. (2001), "Fiscal Requirements for Price Stability," Journal of Money, Credit and Banking.
  • Cochrane, J. (2023), The Fiscal Theory of the Price Level, Princeton University Press.
  • Bianchi, F., R. Faccini and L. Melosi (2023), "A Fiscal Theory of Persistent Inflation," Quarterly Journal of Economics.

Lecture 12: HANK and Monetary Transmission

  • Kaplan, G., B. Moll and G. Violante (2018), "Monetary Policy According to HANK," American Economic Review.
  • Bilbiie, F. (2020), "The New Keynesian Cross," Journal of Monetary Economics.
  • Auclert, A. (2019), "Monetary Policy and the Redistribution Channel," American Economic Review.
  • Auclert, A., B. Bardóczy, M. Rognlie and L. Straub (2021), "Using the Sequence-Space Jacobian to Solve and Estimate Heterogeneous-Agent Models," Econometrica.
  • Kaplan, G., G. Violante and J. Weidner (2014), "The Wealthy Hand-to-Mouth," Brookings Papers on Economic Activity.

Lecture 13: Bayesian Estimation of Monetary DSGE Models

  • An, S. and F. Schorfheide (2007), "Bayesian Analysis of DSGE Models," Econometric Reviews.
  • Smets, F. and R. Wouters (2007), "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review.
  • Herbst, E. and F. Schorfheide (2016), Bayesian Estimation of DSGE Models, Princeton University Press.
  • Iskrev, N. (2010), "Local Identification in DSGE Models," Journal of Monetary Economics.
  • Fernández-Villaverde, J., J. Rubio-Ramírez and F. Schorfheide (2016), "Solution and Estimation Methods for DSGE Models," Handbook of Macroeconomics.

Lecture 14: Identifying Monetary Policy Shocks

  • Christiano, L., M. Eichenbaum and C. Evans (1999), "Monetary Policy Shocks: What Have We Learned and to What End?" Handbook of Macroeconomics.
  • Romer, C. and D. Romer (2004), "A New Measure of Monetary Shocks: Derivation and Implications," American Economic Review.
  • Gertler, M. and P. Karadi (2015), "Monetary Policy Surprises, Credit Costs, and Economic Activity," American Economic Journal: Macroeconomics.
  • Jarociński, M. and P. Karadi (2020), "Deconstructing Monetary Policy Surprises — The Role of Information Shocks," American Economic Journal: Macroeconomics.
  • Plagborg-Møller, M. and C. Wolf (2021), "Local Projections and VARs Estimate the Same Impulse Responses," Econometrica.

Lecture 15: Central Banking in Practice

  • Ball, L. and N. Sheridan (2005), "Does Inflation Targeting Matter?" in Bernanke and Woodford (eds.), The Inflation-Targeting Debate.
  • Bernanke, B. and O. Blanchard (2023), "What Caused the U.S. Pandemic-Era Inflation?" Brookings Hutchins Center Working Paper.
  • Coibion, O., Y. Gorodnichenko and S. Kumar (2018), "How Do Firms Form Their Expectations? New Survey Evidence," American Economic Review.
  • López-Salido, D. and F. Loria (2024), "Inflation at Risk," Journal of Monetary Economics.
  • Blinder, A., M. Ehrmann, J. de Haan and D.-J. Jansen (2024), "Central Bank Communication with the General Public: Promise or False Hope?" Journal of Economic Literature.

Core textbooks

  • Galí, Monetary Policy, Inflation, and the Business Cycle, 2nd ed.
  • Walsh, Monetary Theory and Policy, 4th ed.
  • Woodford, Interest and Prices.
  • Cochrane, The Fiscal Theory of the Price Level.
  • Herbst and Schorfheide, Bayesian Estimation of DSGE Models.
  • Ramey, "Macroeconomic Shocks and Their Propagation," Handbook of Macroeconomics (2016).