This course examines key analytical, empirical and policy issues in monetary policy and central banking. There is a strong emphasis on theory supported by a range of applications, in particular to the Asia Pacific region. Topics covered include empirical features of inflation and output, the monetary transmission mechanism, MIU and CIA models of inflation, the Cagan model of inflation, the credit channel, welfare costs of inflation and deflation, public finance aspects of monetary policy, structural uncertainty, time inconsistency, targeting regimes, instrument choice, open economy issues of monetery economics, New Keynesian models of inflation, and models with microfoundations. Time permitting, additional topics will include recent evidence on money illusion, indeterminacy, multiple equilibria, sunspots, and other advanced topics. Two of the lectures will be guest lectures given by eminent academic/central bankers with decades of policy experience.

The course material is very technical and students are expected to have a very good understanding of static and dynamic optimisation methods.

2 mid-term quizzes 7.5% each (non-redemptive), mid-term assignment 25% (non-redemptive), final exam 60%

Walsh, Carl (2003), Monetary Theory and Policy, MIT Press, Cambridge MA, Second Edition.
Other selected texts and journal articles.