CENTRAL BANK MODELS: A CRITICAL ASSESSMENT

CENTRAL BANK MODELS: A CRITICAL ASSESSMENT

Year: 2018-19
Course code: ECON4080
Course credits: 15
Taught: Semester 1
Course co-ordinatorProfessor Campbell Leith
Entry requirements: Normally admission to an honours programme in Economics.
Available to visiting students:Yes
Contact for more informationGillian Weir

Course description

The course will examine in detail the construction of a representative model which serves as the blueprint for the current generation of macro-econometric models used by central banks. Using simpler models of household and firm behaviour, we shall seek to understand the economic behaviour implicit in this model, and where that description of the economy is more or less likely to fit the data. We shall then consider the policy implications of such modelling by undertaking a series of policy analyses, including assessing the costs and benefits of central bank independence, inflation targeting and other forms of delegated targets. We will also critically evaluate the models currently employed by policy institutions including the Bank of England, ECB, US FED and the IMF.   

It will provide the opportunity to students to engage with debates over the relevance of mainstream macroeconomics and study material that has clear relevance to the “real world”.  Through a combination of relatively accessible theoretical analysis and extensive discussion of the empirical evidence of the theories discussed, students will gain a meaningful framework through which to assess the usefulness of the approach to policy analysis followed by most central banks.   

Learning and teaching methods

20 hours of lectures (10 x 2 hours), Tuesday 11:00-13:00

Course texts

1. Mainly macro
2. The History of Macroeconomics from Keynes’s General Theory to the Present - M. De Vroey, P. Malgrange 2011
3. The New Neoclassical Synthesis and the Role of Monetary Policy. - Marvin Goodfriend, Robert G. King 1997
4. Macro models and macro policy in the 1980s - Kenneth F. Wallis, John D. Whitley 1991
5. Mainly macro: Economics, DSGE and Reality: a personal story
6. The Education of David Stockman - W. Greider 1981
7. An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area - Frank Smets, Raf Wouters 01/09/2003
8. An estimated dynamic stochastic general equilibrium model of the euro area - Frank Smets, Raf Wouters 2002
9. Aggregate Investment - Ricardo J. Caballero 1997
10. The Science of Monetary Policy: A New Keynesian Perspective - Richard Clarida, Jordi Gali, Mark Gertler 1661
11. DSGE Models in the Conduct of Policy: Use as intended - Refet Gürkaynak, Cédric Tille 2017
12. The Trouble With Macroeconomics - Paul Romer 2016
13. Macroeconomics and Methodology - Christopher A. Sims 1996
14. The Great Recession: Earthquake for Macroeconomics - Lawrence J. Christiano 2015
15. Inflation in the Great Recession and New Keynesian Models - Marco Del Negro 2015
16. The Long Slump - Robert E. Hall 2011
17. Labor Markets and Monetary Policy: A New Keynesian Model with Unemployment - Olivier Blanchard 2010
18. Unemployment in an Estimated New Keynesian Model - Jordi Galí Galí, Frank Smets Smets, Rafael Wouters 2012
19. Wholesale Banking and Bank Runs in Macroeconomic Modelling of Financial Crises - Mark Gertler 2016
20. Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy - L. J. Christiano, M. Eichenbaum, C. L. Evans 2005
21. The assessment: consumer expenditure - John Muellbauer 1995
22. Advanced macroeconomics - David Romer c2012
23. Macroeconomics - N. Gregory Mankiw c2013
24. Macroeconomics: imperfections, institutions, and policies - Wendy Carlin, David W. 
25. Advanced macroeconomics - David Romer c2012
26. Macroeconomics: imperfections, institutions, and policies - Wendy Carlin, David W. Soskice c2006
27. How Optimal Is US Monetary Policy? - X. Chen, T. Kirsanova, C. Leith 2017
28. An Empirical Assessment of Optimal Monetary Policy in the Euro Area - Xiaoshan Chen, Tatiana Kirsanova, Campbell Leith 2017-18

Assessment

An essay of 1500-2000 words (30%)
A 2-hour degree exam (April/May) (70%)