Monetary Theory & Monetary Policy

Exam number: 6797

Semester: from 1st semester

Duration of the module: One semester

Form of the module (i.e. obligatory, elective etc.): Elective

Frequency of module offer: Irregularly

Prerequisites: As a prerequisite you need knowledge in microeconomics, macroeconomics, international macroeconomics, math and statistics (Bachelor level).

The seminar can be chosen by IBA-Master and MES-Master students.

You have to register by sending an E-Mail to Dunsch@europa-uni.de until April 4th, 2018. This deadline is also valid for all Erasmus / fx-students. Please use your Viadrina E-mail address if possible. Erasmus / fx students may also register via their private E-Mail address in case that the Viadrina E-Mail account is not set up yet. The point in time you send the E-Mail serves as one decision criterion whether you are in or out. In order to increase the diversity and heterogeneity of the participants a few places are reserved for Erasmus /fx-students.

Afterwards, you will be registered automatically by our chair in the Moodle system. You cannot enroll for this course via the Moodle system by yourself!

The capacity is limited to 25 students.

Applicability of module for other study programmes:
Obligatory or elective in other study programmes. For further information check regulations of the study programme.

Person responsible for module: Prof. Dr. Georg Stadtmann

Name of the professor: Prof. Dr. Georg Stadtmann

Language of teaching: English

ECTS-Credits (based on the workload): 6

Workload and its composition (self-study, contact time):
Contact time (lecture, tutorials, seminar etc.) 45 h; self-study: 135 h

Contact hours (per week in semester): 3

Methods and duration of examination:
Case Solving: 30 %
Presentation: 10 %
Exam: 60 %

Emphasis of the grade for the final grade: Please check regulations of the study programme

Aim of the module (expected learning outcomes and competencies to be acquired):
The purpose of the course is to introduce the students to some of the most widely used models in monetary theory which built the basis for the monetary policy. The course provides basic tools for performing comparative static and dynamic analysis by relying on models for the closed and open economy.  This tool-box contains verbal, graphical and mathematical tools. In addition, the students get hands-on experience analyzing economic data by using Excel or an econometric software.

In relation to the study program's qualification profile, the subject explicitly focuses on:

• Gain knowledge about the different theories that explain the factors which affect money demand or money supply. These concepts include the inventory model of Baumol/Tobin, the liquidity preference theory of Keynes.  
• Students acquire knowledge about the underlying assumptions and equilibrium conditions of common macroeconomic models of the open economy (refresher on IS/LM model as well as the AS/AD model, introduction of the BMW model).
• Students possess the skills to analyze, compare and evaluate the consequences of various macroeconomic shocks on a small open economy. They also gain the skills to quantify these effects. To be more specific, students acquire the skills to apply, for example, Cramer's rule to solve a linear system of equations.
• Enhancing skills in application of statistical procedures to test hypotheses generated by the theoretical models. In this process, students gain the skills to collect, process, analyze and interpret data in Excel or Stata/R. The students master the scientific methodologies of a univariate regression analysis, which includes hypothesis testing and confidence intervals. These regressions might be of time series or cross-section regressions type. Panel econometric techniques are not applied.
• For example, we rely on regression analysis to derive the optimal weights of a Taylor rule for monetary policy.
• In the monetary policy part, students gain knowledge about the strategy, the objective, and the various instruments of the ECB. We will clearly differentiate the two phases before and after crisis to understand the breaks in monetary policy. We will always try to refer to the theory part when analysing the consequences of, for example, quantitative easing for the economy in the short and long run.
• Students acquire the competence to manage work and master situations that are complex, unpredictable and require new solutions. This competence is practiced in 3 group assignments which should be solved in a group of 3-4 students. Group assignments train the competence to initiate and implement research activities within a professional cooperation and take on professional responsibility. The results of the weekly assignments are presented by one group of students to train the skills to present and communicate research based knowledge in a professional manner. Subsequent class discussions train the communication competencies of the group as well as their classmates.
• In order to strengthen the competencies to independently take responsibility for own professional development and specialization a written exam is also a part of the overall grade. This will also strengthen the skills to structure economic thinking and to communicate with professionals and non-specialists in a written form.

Contents of the module:
0. Introduction. What do we know already?
1. What is money?
2. Demand for money
3. Money supply process
4. Monetary policy transmission
5. Rules versus discretion
6. Strategies (simple rules) for a stability oriented monetary policy
7. Monetary policy of the ECB before and after crisis

Teaching and learning methods:
Lectures, seminar

Literature (compulsory reading, recommended literature):
Bofinger: Monetary Policy Oxford University Press 2001.

Further information:
Registration via E-Mail required.