Description:

This course provides the main concepts of monetary economics, emphasizing how monetary policy can affect the domestic economy. It consists of three major parts. The first part starts with the definition of money, its functions, and its measures in the form of monetary aggregates? statistics compiled by central banks. It leads then to the inner workings of financial markets, particularly the interest rate dynamics of bonds and stocks. The second part focuses on the practical conduct of monetary policy. How money supply is created, what monetary policy tools affect the market interest rate, and how central banks can intervene in the foreign exchange market to regulate the exchange rate. The third part sheds light on the theoretical frameworks of money, aggregate demand-supply analysis based on the monetary policy curve, and channels through which the changes in policy interest rate transmit to the aggregate output and inflation in the economy. The nonconventional monetary policy during the global financial crisis of 2007-2009 when countries reached their zero-lower bound of interest rates is demonstrated too. For the special case of Czech monetary policy, a guest speaker from the Czech National Bank will be invited to give his presentation and answer any specific questions, which may interest students in practice.

Contents:

? Introduction: What are money and central banks?
Interest rate
? The meaning and behavior of interest rates
? The risk and term structure of interest rates
? The stock market, the theory of rational expectations, and the efficient market hypothesis
Conduct of monetary policy
? The money supply process
? Tools, instruments, targets, and goals of monetary policy
? The foreign exchange market, foreign exchange interventions, and exchange rate regimes
Monetary policy theory
? The quantity theory and the Keynesian theory of money, aggregate demand-aggregate supply analysis
? Inflation, responses of monetary policy to demand and supply shocks, and nonconventional monetary policy
? Transmission mechanisms of monetary policy

Seminar contents:

There are exercises and problem sets solved together in class on each topic of the lectures. Presentations of the team project take place during exercise sessions as well. More details about the content of presentations and their evaluation will be posted in Moodle.

Recommended literature:

Mishkin, F. S. (2022). The Economics of Money, Banking, and Financial Markets. Harlow, England: Pearson Education, 1-718.
Lecture slides, problem sets, details for the team project presentations, signing-up sheets, and points of students will be posted in Moodle.
Official websites of central banks: https://www.bis.org/cbanks.htm?m=59.
International Monetary Fund: https://www.imf.org/en/Home.
Bank for International Settlements: https://www.bis.org/
Various economic magazines and news periodicals such as Finance and Development Magazine, Global Finance Magazine, the Economist, VoxEU columns, etc.

Abbreviations used:

Semester:

• W ... winter semester (usually October - February)
• S ... spring semester (usually March - June)
• W,S ... both semesters

Mode of completion of the course:

• A ... Assessment (no grade is given to this course but credits are awarded. You will receive only P (Passed) of F (Failed) and number of credits)
• GA ... Graded Assessment (a grade is awarded for this course)
• EX ... Examination (a grade is awarded for this course)
• A, EX ... Examination (the award of Assessment is a precondition for taking the Examination in the given subject, a grade is awarded for this course)

Weekly load (hours per week):

• P ... lecture
• C ... seminar
• L ... laboratory
• R ... proseminar
• S ... seminar