Monetary Policy in a Closed Economy

(Monetary Policy & Financial System)

The course was held for the last time by Prof. Bofinger in WS 2019/20.

ECTS

5 ECTS

Description

The course will address the following topics:

1. Overview of the financial crisis
2. The real economic (classical) theory of the financial system for a "real exchange economy", "loanable funds" model
3. The Diamond and Dybvig model to explain bank runs
4. Monetary (Keynesian) theory of the financial system for a monetary economy, IS/LM model in the context of a monetary economy
5. Price theory model of the banking system
6. Mixed forms of real and monetary analysis
7. Economic policy implications of real and monetary analysis: secular stagnation, saving(s) glut, German current account surplus, crowding out, full money theory, euro crisis, paradox of capital, Feldstein-Horioka
8. Modern monetary theory (MMT)
9. Digitalization of money: cryptocurrencies, stablecoins (Libra), central bank credit for all (Central Bank Digital Currencies, CBDC)
10. Target balances
11. IS/PC/MP model: interdependence of monetary and fiscal policy, theory of deflation.