OVERVIEW

The course aims at illustrating from a macroeconomic point of view the main theoretical frameworks that explain the functioning of financial markets and the behaviour of monetary institutions.
 

AIMS AND CONTENT

LEARNING OUTCOMES

Knowledge of the main economic models through which firms determine the level of the undertaken productive investment and the stock of capital effectively employed in the production of goods and services. Understanding of the analytical and formal tools that allow to represent in a synthetic and abstract way the optimal choice of firms regarding the decision to acquire additional productive capacity. Knowledge of the main economic models that describe the occurrence and effects of a financial crisis. Understanding of the mechanisms through which a financial crisis is transmitted to the real economy, affecting income and employment. Knowledge of the main economic models that describe the behaviour of the central bank regarding the determination of interest rates and money supply. Understanding of the analytical and formal tools that allow a synthetic and abstract representation of the monetary policy of the central bank. Understanding of the choices and objectives of the central bank in the aftermath of a real or a financial crisis.

AIMS AND LEARNING OUTCOMES

The course aims at providing a comprehensive overview of the main theoretical models that describe the functioning of financial and monetary markets. At the end of the course, the student will be able to assess the extent and effects of the main imperfections that characterize the financial markets as well as to handle the analytical frameworks that describe the behavior of the central bank in relation to the determination of monetary aggregates and interest rates. Without neglecting the empirical implications of the theoretical models taken into consideration, particular emphasis will be given to the formal structure of the various topics covered during the course. In this way, the student will not only be able to reproduce the theoretical frameworks explored durung the classes but also to try to build new models.

PREREQUISITES

Students are supposed to be proficient with basic microeconomics and macroeconomis.
 

TEACHING METHODS

The course is given through frontal lessons.

SYLLABUS/CONTENT

FIRST PART: FINANCIAL ECONOMICS

I. INVESTMENT

1. Investment and the Cost of Capital

2. A Model of Investment with Adjustment Costs

3. Tobin’s q

4. Analyzing the Model

5. Implications 435

6. Empirical Application: q and Investment

7. The Effects of Uncertainty

8. Kinked and Fixed Adjustment Costs

II. FINANCIAL MARKETS AND FINANCIAL CRISES

1 A Model of Perfect Financial Markets

2 Agency Costs and the Financial Accelerator

3 Empirical Application: Cash Flow and Investment

4 Mispricing and Excess Volatility

5 Empirical Application: Evidence on Excess Volatility

6 The Diamond-Dybvig Model

7 Contagion and Financial Crises

8 Empirical Application: Microeconomic Evidence on the Macroeconomic Effects of Financial Crises

SECOND PART: MONETARY ECONOMICS

III. MONETARY POLICY

1 Inflation, Money Growth, and Interest Rates

2 Monetary Policy and the Term Structure of Interest Rates

3 The Microeconomic Foundations of Stabilization Policy 588

4 Optimal Monetary Policy in a Simple Backward-Looking Model

5 Optimal Monetary Policy in a Simple Forward-Looking Model

6 Some Additional Issues Concerning Interest-Rate Rules

7 The Zero Lower Bound on the Nominal Interest Rate

8 The Dynamic Inconsistency of Low-Inflation Monetary Policy

9 Empirical Applications: Independence of the Central Bank, Inflation and Iperinflation

10 Seignorage and Inflation

RECOMMENDED READING/BIBLIOGRAPHY

The official textbook is Romer, D. (2019), Advanced Macroeconomics, 5th edition, McGraw-Hill (ISBN: 978-1-260-18521-8). Futher material will be indicated by the teacher during the lectures where appropriate.

TEACHERS AND EXAM BOARD

Exam Board

MARCO GUERRAZZI (President)

ANNA BOTTASSO (President Substitute)

LESSONS

Class schedule

The timetable for this course is available here: Portale EasyAcademy

EXAMS

EXAM DESCRIPTION

The exam involves passing a written test based on open-ended questions. At the discretion of the teacher, it may be required the realization of a short dissertation that will allow the exemption from one of the two parts of the program.

ASSESSMENT METHODS

The written exam, as well as the possible short dissertation, aims at evaluating the student's ability to reproduce and interpret the analytical structure of the theoretical models taken into consideration by using formulas and graphs.

Exam schedule