The approach adopted in this module is to explain the main monetary theories and policies in the context of Ireland's membership of European Monetary Union and the operations and policies of the European Central Bank. Among the 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 Eurozone; the determination of interest rates; exchange rate, interest rate, and fiscal policies in the Eurozone. In addition, a number of topics in international finance are examined including the various hedging techniques developed to minimize exchange rate and interest rate risk.

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.