Monetary Economics

Rationale and Purpose of the Module: This course in Monetary Economics covers topics in Financial Markets, Financial Institutions, Central Banking, International Finance and Monetary Theory. These topics are discussed at various stages in the course. The central theme is to develop a dynamic monetary model of a small, open economy. The Course Outline (see below) explains how this is achieved and at what point the other topics are examined. Among the policy issues discussed are: economic adjustment to asymmetric shocks given the constraints of monetary union; the operations and policies of the European Central Bank; the transmission of monetary policy in the Euro-area; and the determination of interest rates.

Syllabus: 
1. Introduction to the Theory of Income Determination; Equilibrium in the Goods and Services Market; Deriving the SRAS model; Adjusting to Demand-side Shocks; Adjusting to a Supply-side Shock
2. Money and Banking Money Creation in a Modern Economy; The money multiplier; The Role of a Central Bank; Seigniorage; Lender of last resort; High-powered Money and the Money Multiplier; Instruments of Monetary Policy
3. Money and Interest Rates in a Closed Economy; The Demand for Money; Money Market Equilibrium; Aggregate Demand and Interest Rates; Monetary Policy and the Keynesian, Classical Debate; Monetary Financing
4. The IS-LM Model Equilibrium in the Goods Market: The IS Curve; Equilibrium in the Money Market: The LM Curve; Equilibrium in the Goods and Money Markets ; The Relative Effectiveness of Fiscal and Monetary Policy in the IS-LM Model ; The IS-LM Model and Aggregate Demand
5. The Phillips Curve and the Inflation-Unemployment Trade-off The expectations-augmented Phillips curve; Deflation, Expectations and Credibility; The sacrifice ratio; The Augmented Phillips Curve: Evidence from the Euro-area; Estimates of the natural rate of unemployment; Recent Developments Relating to the Phillips Curve; The Phillips Curve and the AD-AS Model
6. The Mundell-Fleming Model Internal and External Balance; Introduction to the Mundell-Fleming Model; The Model Under Fixed Exchange Rates; The Model Under Floating Exchange Rates; Exchange Rate and Country Risk; Economic Policy, Output and the Current Account; The Aggregate Demand Curve Guest Lecture Dr Alan Ahearne NUI, Galway How has the ECB responded to the financial crisis? Long term refinancing operations (LTRO) and Outright Monetary Transactions (OMT). How has the Federal Reserve responded to the financial crisis? Quantitative easing (QE). Guest Lecture John Rowe Financial Markets Division, Central Bank of Ireland Monetary Policy Framework; National Central Bank's and the Liquidity Position of Commercial banks.; Forecasting Liquidity Facilities; Reaction of Central Bank's to the Financial Crisis.
7. European Monetary Union and the European Central Bank The Political Benefits of EMU to Ireland; The Economic Benefits of EMU to Ireland; The Economic Costs of EMU; The European Central Bank ; ECB Independence ; How Interest Rates Are Set in the Euro Area; Monetary Policy in EMU; The Euro Area Inflation Record; One Monetary Policy Fits All?
8. A Dynamic Monetary Model of Aggregate Demand and Aggregate Supply The Dynamic Model of Aggregate Demand and Aggregate Supply; The Dynamic Aggregate Supply (DAS) Curve; The Dynamic Aggregate Demand (DAD) Curve; Deflationary Demand-side Shock; The Central Bank's Inflation Target; An Expansionary Demand-side Shock; The Labour Market and the Adjustment Process
9. Savings, Investment and the Balance of Payments Savings and Investment in a Closed Economy; Saving, Investment and the Balance of Payments; The Interest Rate and Capital Flows; The Real Exchange Rate and Net Exports; Savings and Investment in the Small, Open Economy; The Effects of Fiscal Policy; The Effects of a Change in the World Interest Rate; Applying the Model to the Irish Economy in EMU
10. The Economic Crash of 2008 and Its Aftermath The Property Boom; Displacement ; Credit expansion; Euphoria ; Financial Distress; Revulsion; Coping With the Fiscal Crisis; Coping With the Banking Crisis; The Troika Agreement; Is the Irish National Debt Sustainable?; No-one Shouted 'Stop'; Specific Policy Failures