Monetary Economics

The details
Colchester Campus
Postgraduate: Level 7
Monday 13 January 2020
Friday 20 March 2020
24 April 2019


Requisites for this module



Key module for

MSC L12012 Money and Banking,
MSC L120UH Money and Banking

Module description

This module is designed as a self-contained introduction to the study of monetary economics and policy. It is aimed at students with a strong interest in understanding how central banks go about setting monetary policy, the empirical evidence that guides them, and the mathematical and computational tools that go along with building models to answer policy questions.

The course is split into three broad themes. These will be introduced in lectures, and will be developed in class. Classes will be split between computer labs, where students will learn how to solve the models presented in the lectures through coding, and traditional classes where problem sets will be discussed.

The first theme covers the basics of monetary policy analysis. Evidence on the short- and long-run effects of money on prices and the real economy is discussed, focusing on the tension that money appears to be "neutral" on the real economy in the long run, but have powerful effects in the short run. The "Money in Utility" model is introduced, and used to discuss the neutrality of money and the "Taylor Principle" underpinning how modern central banks conduct monetary policy through the setting of interest rates.

The second theme covers monetary theory and policy using the "New Keynesian" model, which has been a workhorse of macroeconomic research in academia and central banking for nearly two decades. This is a modern sticky-price model which is used to explain how money can have real effects in the short run. Optimal policy is derived, allowing students to understand when and how central banks should respond to economic shocks to maximise welfare.

The third and final theme covers applied topics in monetary economics: (1) The crucial extension of the above framework to situations where the economy is at the Zero Lower Bound, and whether the central bank can still boost the economy using forward guidance or quantitative easing. (2) Financial frictions, and whether quantitative easing may work better if it helps alleviate financial frictions. (3) Structural Vector Autoregression (SVAR) methods where we revisit the empirical evidence on the effects of monetary shocks on the economy using modern econometric tools.

Module aims

This module aims to equip students with the basic tools needed to start employment at a central bank or public institution, or to continue academic research in monetary economics. The model aims to teach students the empirical research and modelling that motivates modern monetary policy, and to introduce them to the computer programming skills used in this area.

Module learning outcomes

Upon successful completion of this module, students will understand variations of the basic New Keynesian model and apply it to study monetary aspects of the business cycle and pertinent policy implications. They will also become acquainted with the relevant methodology used in applied theoretical and empirical research in the field and be able to critically assess its limitations.

Key employability skills delivered by the module include numeracy and ICT skills; research, information and communication skills; self-awareness, target setting, time management; reflection and evaluation. The key academic skills delivered by the module are detailed in the Key Skills table

Module information

No additional information available.

Learning and teaching methods

The module will consist of one two-hour lecture per week and one two-hour class/lab session every other week. Lecture notes, class exercises and supporting materials can be accessed via Moodle.


  • Walsh, Carl E. (c2010) Monetary theory and policy, Cambridge, Mass: MIT Press.
  • Walsh, Carl E. (2017) Monetary theory and policy, Cambridge, Massachusetts: MIT Press.
  • Christiano, Lawrence J.; Eichenbaum, Martin; Evans, Charles L. (1999-) 'Monetary policy shocks: what have we learned and to what end?', in Handbook of macroeconomics, Amsterdam: Elsevier. vol. 1A, pp.65-148

The above list is indicative of the essential reading for the course. The library makes provision for all reading list items, with digital provision where possible, and these resources are shared between students. Further reading can be obtained from this module's reading list.

Assessment items, weightings and deadlines

Coursework / exam Description Deadline Weighting
Coursework   Term Paper  24/04/2020  100% 
Exam  120 minutes during Summer (Main Period) (Main) 

Overall assessment

Coursework Exam
50% 50%


Coursework Exam
50% 50%
Module supervisor and teaching staff
Dr Alexander Clymo, email:
Dr Alexander Clymo
For further information, send a message to



External examiner

Dr Francis Kiraly
Newcastle University
Lecturer Economics
Available via Moodle
Of 32 hours, 20 (62.5%) hours available to students:
12 hours not recorded due to service coverage or fault;
0 hours not recorded due to opt-out by lecturer(s).


Further information

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