Students

ECON844 – Monetary and Financial Policies

2016 – S2 Evening

General Information

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Unit convenor and teaching staff Unit convenor and teaching staff Unit Convenor
Ben Wang
ben.wang@mq.edu.au
Contact via ben.wang@mq.edu.au
E4A 432
TBA in the first lecture
Credit points Credit points
4
Prerequisites Prerequisites
ECON633
Corequisites Corequisites
Co-badged status Co-badged status
Unit description Unit description
This unit examines a number of issues in monetary theory and policy. We begin with a refresher survey of the workhorse models in macroeconomics – ISLM, ASAD – and develop these for intertemporal modelling. Issues in monetary and fiscal policy design are then discussed, particularly in regard to the global financial crisis of 2008–2009. We study the key models of monetary economies in professional use today. They are based on what are known as dynamic stochastic general equilibrium (DSGE) models. These models are simulated in class to help understand how they respond to shocks like the global financial crisis.

Important Academic Dates

Information about important academic dates including deadlines for withdrawing from units are available at https://www.mq.edu.au/study/calendar-of-dates

Learning Outcomes

On successful completion of this unit, you will be able to:

  • Comprehend what drives the relationships between key macroeconomic indicators (e.g. inflation, growth, interest rates, stock market indices) that should be a part of every manager’s information set.
  • Construct a framework for understanding modern dynamic stochastic general equilibrium models.
  • Analyse dynamic path of key economic variables and able to communicate the analysis to diverse audience.

General Assessment Information

Should you have serious and unavoidable situations that prevent you to complete your assessment tasks, please consult the `disruption to studies' policy for instructions. (http://students.mq.edu.au/student_admin/manage_your_study_program/disruption_to_studies/)

Late submissions will result in a reduction of 10% of the total mark for each day, up to three days. The assessment will be marked as zero if it cannot be submitted within three days after the deadline.

Assessment Tasks

Name Weighting Due Groupwork/Individual Short Extension AI assisted?
1. Mid Semester Examination 25% 16 September (6pm) No
2. Essay 15% 21 October (6pm) No
3.Group presentation 10% 4 November (6PM) No
4. Final Examination 50% Exam period No

1. Mid Semester Examination

Due: 16 September (6pm)
Weighting: 25%
Groupwork/Individual:
Short extension 3: No
AI assisted?:

Two-hour exam on 16 September, 6pm in our lecture room. The mid-session test will be closed-book. It will involve multiple choice questions, essay questions or small problems based on topics studied in the course. 
On successful completion you will be able to:
  • Comprehend what drives the relationships between key macroeconomic indicators (e.g. inflation, growth, interest rates, stock market indices) that should be a part of every manager’s information set.
  • Construct a framework for understanding modern dynamic stochastic general equilibrium models.
  • Analyse dynamic path of key economic variables and able to communicate the analysis to diverse audience.

2. Essay

Due: 21 October (6pm)
Weighting: 15%
Groupwork/Individual:
Short extension 3: No
AI assisted?:

Choice EITHER of the following topics: 1. Describe the financial problems faced by Greece in 2012-15, and explain how the solutions in place may or may not solve these. Should Greece be best left out of the Euro zone? OR: 2. The economy and macroeconomic policies under the zero lower bound. Format: 2000 words limit, 12 point, 1.5 line spaces, A4. Please note you will get zero for the essay if you do not hand-in before the due date. You need to hand a hard copy during the lecture on 21 October, and also a softcopy to Turnitin through your iLearn unit webpage. 

This Assessment Task relates to the following Learning Outcomes: • Comprehend what drives the relationships between key macroeconomic indicators (e.g. inflation, growth, interest rates, stock market indices) that should be a part of every manager’s information set. • Establish and discuss the design and constraints of monetary and macroprudential regulation policy; in normal times and during a crisis. • Construct a framework for understanding modern dynamic stochastic general equilibrium models.
On successful completion you will be able to:
  • Comprehend what drives the relationships between key macroeconomic indicators (e.g. inflation, growth, interest rates, stock market indices) that should be a part of every manager’s information set.
  • Construct a framework for understanding modern dynamic stochastic general equilibrium models.
  • Analyse dynamic path of key economic variables and able to communicate the analysis to diverse audience.

3.Group presentation

Due: 4 November (6PM)
Weighting: 10%
Groupwork/Individual:
Short extension 3: No
AI assisted?:

You will be allocated in a group in week 1. You need to choose a topic that interests you that broadly relates to macroeconomic and business cycle policies, and consult with your unit convenor about your choice by week 3 (19 Ausgust). If you fail to do so you will lose all the marks for this assessment. If there is more than one group that wants to present on the same topic, then the topic will be allocated to the group that first emailed their choice to the unit convenor. Each group will have 20 minutes to present, followed by 5-10 minutes discussion with your fellow students and the lecturer. If you choose a topic that relates to an event, please discuss the background, how the event evolved over time and what were the policies implemented. If you choose a topic that relates to an issue, please introduce the background of the issue. Regardless of your topic, you should discuss potential policy implications and your understanding of the topic. All members of the group are expected to conduct part of the presentation and participate in the discussion.

This assessment accounts for 10% of the total mark. Out of this 10%, 7.5% will be allocated to the presentation and 2.5% will be allocated to the class participation, eg: discussions on others' presentations. To secure this 2.5%, those who participated in the discussion of others' presentations need to record their name and ID with the lecturer at the end of lecture.

The actual presentation will take place in weeks 12 in the lecture. However, all groups need to email their presentation slides to the unit convenor by 5pm on Friday in week 11 (28th of October). The following list contains a sample of topics that may interest you:

  • Brexit
  • Risk, uncertainty and their impact
  • Expectation formation
  • The impact of news on business cycle fluctuations
On successful completion you will be able to:
  • Comprehend what drives the relationships between key macroeconomic indicators (e.g. inflation, growth, interest rates, stock market indices) that should be a part of every manager’s information set.
  • Analyse dynamic path of key economic variables and able to communicate the analysis to diverse audience.

4. Final Examination

Due: Exam period
Weighting: 50%
Groupwork/Individual:
Short extension 3: No
AI assisted?:

The end-of-session exam will be closed-book. It will involve multiple-choice questions, essay questions or small problems based on ALL topics studied in the unit. Questions will primarily come from the second-half of the course, but not exclusively.
On successful completion you will be able to:
  • Comprehend what drives the relationships between key macroeconomic indicators (e.g. inflation, growth, interest rates, stock market indices) that should be a part of every manager’s information set.
  • Construct a framework for understanding modern dynamic stochastic general equilibrium models.
  • Analyse dynamic path of key economic variables and able to communicate the analysis to diverse audience.

Delivery and Resources

 

Required and Recommended Texts and/or Materials

For the first part of the course, we will use selected chapters from:

Olivier Blanchard & Jeffrey Sheen Macroeconomics Pearson, 4th Australasian edition, 2013

The fourth edition has a lot of material that will be directly relevant to the unit – in particular on building the foundation of our models.

For the rest of course, we will connect with selected chapters from:

Jordi Gali, Monetary Policy, Inflation and the Business Cycle, Princeton Press, Second edition 2015

Michael Wickens Macroeconomic Theory Princeton Press, 2008

Carl E Walsh, Monetary Theory & Policy MIT Press, 3rd ed , 2010

 

Unit Web Page

You can access the ECON844 web site on iLearn from anywhere on the Internet. To login you need a Username and password. All lecture slides should be available on the iLearn site at least by midday of the lecture.

Unit Schedule

Topic 1.  Quick refresher on ISLM, ASAD macroeconomic models; the role of expectations in financial markets, and for consumption and investment

  • Blanchard & Sheen 2013 Chapters 3-8, 14-17.
  • Stevens, Glenn et al (2010) “Fifty Years of Monetary Policy: What Have We Learned?”, Bank for International Settlements, RBA Anniversary Conference: www.rba.gov.au/publications/confs/2010/index.html

Topic 2.  The macroeconomics of financial crises; systemic risk and macroprudential regulation

Topic 3.  The design and implementation of monetary policy and financial regulation ; fiscal constraints on monetary policy; inflation and deflation; government debt and inflation; the intertemporal government budget constraint.

  • Blanchard & Sheen 2013, Chapters 22-25
  • Walsh Chapters  Ch 4.1-3 or Wickens Chapter 5 (5.1-5.5)
  • Blanchard, Olivier, Giovanni Dell’Ariccia, and Paolo Mauro (2010) “Rethinking Macroeconomic Policy” IMF Staff Position Note, February, www.imf.org/external/pubs/cat/longres.cfm?sk=23513.0
  • Cochrane, John (2011) “Understanding fiscal and monetary policy in the great recession: Some unpleasant fiscal arithmetic.” European Economic Review, January 55, 2-30
  • Stevens, Glenn (2011) “The role of finance” The Economic Record, March, pp. 1-11.

Topic 4. Basic monetary models; money in utility; optimal rate of inflation

  • Walsh Chapters 2 (2.1-2.3), 3 (3.1-3.3), 4 (4.1-4.4) or Gali  Chapter 2 or Wickens Chapters 2, 4, 8
  • Robert Lucas (2000) "Inflation and welfare." Econometrica, 68(2), 247-74.

 Topic 5. Solving forward-looking models, the New Keynesian model with nominal rigidities and optimal monetary policy

  • Walsh Chapter 5 (5.1-5.3) or Gali Chapters 2-4, 6 or Wickens Chapters 9, 13, 14, 15 (Mathematical appendix)
  • Romer, David (2006) Advanced Macroeconomics, McGraw Hill, 3rd ed. Ch 4
  • Rebelo, Sergio (2005) “Real business cycle models: Past, present and future” Scandinavian Journal of Economics 107 (2), 217–238.
  • Christiano, Larry, Martin Eichenbaum & C.Evans (2005) “Nominal rigidities and the dynamic effects of a shock to monetary policy” Journal of Political Economy, 113 (1).
  • Clarida, Richard, Jordi Gali, and Mark Gertler (1999) “The science of monetary policy: A new Keynesian perspective,” Journal of Economic Literature, 37(4), 1661–1707.

Topic 6 (tentative). Solving and Estimating DSGE Models

  • Note will be supplied.

 

 

 

Policies and Procedures

Macquarie University policies and procedures are accessible from Policy Central. Students should be aware of the following policies in particular with regard to Learning and Teaching:

Academic Honesty Policy http://mq.edu.au/policy/docs/academic_honesty/policy.html

New Assessment Policy in effect from Session 2 2016 http://mq.edu.au/policy/docs/assessment/policy_2016.html. For more information visit http://students.mq.edu.au/events/2016/07/19/new_assessment_policy_in_place_from_session_2/

Assessment Policy prior to Session 2 2016 http://mq.edu.au/policy/docs/assessment/policy.html

Grading Policy prior to Session 2 2016 http://mq.edu.au/policy/docs/grading/policy.html

Grade Appeal Policy http://mq.edu.au/policy/docs/gradeappeal/policy.html

Complaint Management Procedure for Students and Members of the Public http://www.mq.edu.au/policy/docs/complaint_management/procedure.html​

Disruption to Studies Policy http://www.mq.edu.au/policy/docs/disruption_studies/policy.html The Disruption to Studies Policy is effective from March 3 2014 and replaces the Special Consideration Policy.

In addition, a number of other policies can be found in the Learning and Teaching Category of Policy Central.

Student Code of Conduct

Macquarie University students have a responsibility to be familiar with the Student Code of Conduct: https://students.mq.edu.au/support/student_conduct/

Results

Results shown in iLearn, or released directly by your Unit Convenor, are not confirmed as they are subject to final approval by the University. Once approved, final results will be sent to your student email address and will be made available in eStudent. For more information visit ask.mq.edu.au.

Student Support

Macquarie University provides a range of support services for students. For details, visit http://students.mq.edu.au/support/

Learning Skills

Learning Skills (mq.edu.au/learningskills) provides academic writing resources and study strategies to improve your marks and take control of your study.

Student Services and Support

Students with a disability are encouraged to contact the Disability Service who can provide appropriate help with any issues that arise during their studies.

Student Enquiries

For all student enquiries, visit Student Connect at ask.mq.edu.au

IT Help

For help with University computer systems and technology, visit http://www.mq.edu.au/about_us/offices_and_units/information_technology/help/. 

When using the University's IT, you must adhere to the Acceptable Use of IT Resources Policy. The policy applies to all who connect to the MQ network including students.

Graduate Capabilities

PG - Discipline Knowledge and Skills

Our postgraduates will be able to demonstrate a significantly enhanced depth and breadth of knowledge, scholarly understanding, and specific subject content knowledge in their chosen fields.

This graduate capability is supported by:

Learning outcomes

  • Comprehend what drives the relationships between key macroeconomic indicators (e.g. inflation, growth, interest rates, stock market indices) that should be a part of every manager’s information set.
  • Construct a framework for understanding modern dynamic stochastic general equilibrium models.
  • Analyse dynamic path of key economic variables and able to communicate the analysis to diverse audience.

Assessment tasks

  • 1. Mid Semester Examination
  • 2. Essay
  • 3.Group presentation
  • 4. Final Examination

PG - Critical, Analytical and Integrative Thinking

Our postgraduates will be capable of utilising and reflecting on prior knowledge and experience, of applying higher level critical thinking skills, and of integrating and synthesising learning and knowledge from a range of sources and environments. A characteristic of this form of thinking is the generation of new, professionally oriented knowledge through personal or group-based critique of practice and theory.

This graduate capability is supported by:

Learning outcomes

  • Comprehend what drives the relationships between key macroeconomic indicators (e.g. inflation, growth, interest rates, stock market indices) that should be a part of every manager’s information set.
  • Construct a framework for understanding modern dynamic stochastic general equilibrium models.
  • Analyse dynamic path of key economic variables and able to communicate the analysis to diverse audience.

Assessment tasks

  • 1. Mid Semester Examination
  • 2. Essay
  • 3.Group presentation
  • 4. Final Examination

PG - Research and Problem Solving Capability

Our postgraduates will be capable of systematic enquiry; able to use research skills to create new knowledge that can be applied to real world issues, or contribute to a field of study or practice to enhance society. They will be capable of creative questioning, problem finding and problem solving.

This graduate capability is supported by:

Learning outcomes

  • Comprehend what drives the relationships between key macroeconomic indicators (e.g. inflation, growth, interest rates, stock market indices) that should be a part of every manager’s information set.
  • Construct a framework for understanding modern dynamic stochastic general equilibrium models.
  • Analyse dynamic path of key economic variables and able to communicate the analysis to diverse audience.

Assessment tasks

  • 1. Mid Semester Examination
  • 2. Essay
  • 3.Group presentation
  • 4. Final Examination

Research and Practice

This unit gives you practice in applying research findings in your tutorials and assignment.