Marco Del Negro
Office: ITAM Sta. Teresa; CIE
Phone: 628 4197 ext. 2962
E-mail: delnegro@master.ster.itam.mx
Course Home-page: $http://master.ster.itam.mx/\symbol{126}delnegro/tpmm/tpm\_s00.htm$

Syllabus: Teoría y Política Monetaria, Spring 2000

Time and Place: Monday and Wednesday; 17:30-19:00; Room 307
Office Hours: For the time being, by appointment
Mechanics of the course:

• The class will be taught in English. If you do not have trouble understanding an economic text written in English, you will be able to follow this class. You can choose to write the answers to exams and problem sets in Spanish.
• There will be a final exam, a midterm, and biweekly problem sets. The final grades will be assigned as follows: final 60%, midterm 40%. Problem sets will be assigned and will have to be handed in on time. Handing in problem sets late, or not handing them in at all, will negatively affect your final grade. I will hand in answers to problem sets, which will be part of the material for the exam.
• Questions are very welcome. Feel free to interrupt me any time.
• The course will try to rely on both intuition and on formal models. The level of math required to take this class is not advanced at all, but be ready to use standard algebra quite often.
• The course will rely on the internet: on my home page (see above) you will find announcements, class notes, and other material.
• The course will mainly rely on the class notes. The textbook ``Monetary theory and policy" by Carl E. Walsh (ISBN: 0262231999), edited by MIT Press is useful as a complement, but will not be followed too strictly. It is a good book, in my opinion, but it is not necessary to buy it in order to follow the class.
  

Course Outline

PART I: PRELIMINARIES

• Introduction
• Asset Pricing: Pricing of Financial Assets by Forward Looking Agents
• The Price of Durable Goods
  

PART II: MONETARY THEORY AND POLICY IN A CLOSED ECONOMY

• The Role of Money: A Cash-in-Advance Model
• The Value of Money: The Sidrauski-Brock Model
• Inflation and the Growth Rate of Money Supply
• Inflation and the Nominal Interest Rate
• The Benefits from Reducing Inflation
• The Effect of Unanticipated Changes in Monetary Policy
• The Effect of Anticipated Changes in Monetary Policy - The End of Hyperinflations
• The Interaction Between Fiscal and Monetary Policy: The Intertemporal Budget Constraint of the Government
• Active/Passive Monetary and Fiscal Policies
  

PART III: MONETARY POLICY IN AN OPEN ECONOMY

• Monetary Policy in an Open Economy: Flexible Exchange Rates
• Fixed Exchange Rates and `Crawling Peg'
• Fixed Exchange Rates As A Way of Stopping Inflation
• Currency Crises
  

PART IV: MONETARY POLICY, PRODUCTION, AND EMPLOYMENT

• The Impact of Monetary Policy, Production and Employment with Fixed and Flexible Prices
• Is Monetary Policy Neutral?
  

PART V: CREDIBILITY AND TIME INCONSISTENCY

• Policy Games: Monetary Policy and the Unemployment/ Inflation Trade Off
• Reputation and Targeting
  

PART VI: INSTITUTIONS AND REGULATIONS

• Determinants of the Money Supply
• Banking Regulations