Monetary Macroeconomics

Objective: The aim of the course is to introduce the neoclassical flexible prices models and the New Keynesian models with price rigidity. We discuss the implications for the design and the implementation of monetary policy. The level of modeling corresponds to that of the undergraduate textbooks (Blanchard, Mankiw).

Outline:

I - Flexible price models, the neoclassical trend

1. Macroeconomics, currency and general equilibrium

• Patinkin and the classic-neoclassical model
• Real cash effect and currency integration
• The Friedmanian monetarism (nominal income model, transmission process), notion of natural unemployment rate
• Phillips curve increased expectations
• Articulation of Phillips and Okun relationships in the construction of a macroeconomic supply curve
• Overall demand curve and actual cash flow effect
• The Friedmanian model of global equilibrium
• Exchange rate overreaction (Dornbusch model)

2. New classical economy and rational expectations

• Lucas bid curve
• Theory of the inefficiency of monetary policy
• Problem of the temporal incoherence of Kydland and Prescott
• Barro and Gordon model, application to monetary policy design

II - Rigid price models, the neo-Keynesian current

1. From the IS-LM model to the AS-AD model

• Keynes betrayal?
• From the monetary analysis of Keynes to the model IS-LM then AS-AD (Hicks, Modigliani)
• IS-LM model and open economy (Mundell and Fleming model, Phillips curve in open economy)

2. The contemporary neo-Keynesian model

• The Taylor rule
• IS-LM without LM : analysis of D. Romer, model of Blanchard and Cohen, applications to the open economy
• Neokeynesian explanations of price rigidities (Mankiw model)
• Wage rigidity (efficiency wage theory of Akerlof and Yellen)
• New approaches to the Phillips curve (Akerlof, Dickens and Perry)
• The canonical neokeynesian model and the " New neoclassical synthesis" (Jordi and Gertler)
• Theory of Animal Spirits (Keynes, Akerlof and Shiller)
• Coordination deficiencies (Cooper and John)
• Credit market and information asymmetries in the new Keynesian economy (Stiglitz and Weiss)

Grading: 1 continuous assessment and an oral presentation during the semester and then, a final exam at the end of the semester.

Bibliography:

• Abel, A., Bernanke , B. S. et D. Croushore (2013), Macroeconomics, 8^e édition, Pearson International Edition ;
• Blanchard, O.-J., Cohen, D. et D. Johnson: Macroéconomie (2013), 6^e édition, Pearson Éducation ;
• Hoover, K. (2012) : Applied Intermediate Macroeconomics, Cambridge University Press ;
• Koenig, G. (2000): Analyse monétaire et financière, Economica et CNED ;
• Mankiw G. N. (2013) : Macroeconomics, 8^e édition, Worth Publishers, traduction française sous le titre : Macroéconomie, De Boeck Université, 2013.

• Mishkin, F. & alii (2013), Monnaie, banque et marchés financiers, 10^e édition, Pearson.