The aim of this course is to introduce students to the principles of Monetary Economics. Monetary Economics is a field of Economics which analyses the operation of the money market, the transmission channels of monetary policy and the principles underpinning the conduct of optimal monetary policy. The central theme is to develop a dynamic monetary model to explain the determination of output and interest rates, first, in a closed economy and an open economy. The Course Outline (see below) explains how this is achieved and at what point the other topics are examined. The course also examines the relationship between inflation and unemployment, with emphasis on how the introduction of expectations in macroeconomics has changed the criteria driving the optimal conduct of monetary policy. 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. 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.

The course begins by introducing how output and interest rates are determined in the goods and financial market respectively. The interaction between both markets is then examined to identify the separate and simultaneous effects of monetary and fiscal policy in the short run. The next few topics explore the determination of prices and wages in the labour market, as well as the relationship between inflation and unemployment. This is followed by an examination of a theoretical model which explains the behaviour of output, unemployment and inflation in the short and medium run. The role of expectations in shaping the effectiveness of policy (monetary and fiscal) is also studied. The latter part of the module focuses on the factors affecting the effectiveness of monetary and fiscal policy, changes in the conduct of monetary policy, especially with regard to the shift from monetary targeting to inflation targeting, and the introduction of unconventional monetary policy tools. In addition, a model to investigate the determination of output and interest rate under a fixed and flexible exchange rate regime, and the effectiveness of monetary and fiscal policy within an open economy, is developed.

On successful completion of the module, students will be able to: i) Demonstrate an understanding of the key principles underlying the macroeconomy, the determinants of the money market and the interaction between financial and goods markets. ii) Explain the transmission channels of Central Banks' choices. iii) Demonstrate graphical and mathematical representation of economic ideas and analysis. iv) Demonstrate the ability to justify conclusions using economic arguments with appropriate rigour.

On successful completion of the module, students will be able to: i) Demonstrate an awareness of the main debates concerning the effectiveness of monetary policy and the rules for the conduct of monetary policy.

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The module is delivered through a series of lectures and tutorials, with a focus on developing economic models to explain the determination of output and interest rates in an open and closed economy, and the effect of policy on macroeconomic variables. Each week, students must complete a set of problems which enable them gain significant knowledge around the importance of monetary policy as a tool for influencing economic activity, and an appreciation of the necessary conditions for policy effectiveness. Class discussions around the debate on a passive versus a more active role for policy develop students' sense of responsibility towards maintaining sustainable economic policies.