• 098471 - MACROECONOMICS OF FINANCE

Macroeconomics of Finance - 5 CFU

Overview

The aim of the course is to stress the importance and the effects of financial choices and of monetary policy decisions on real economic activity. After introducing some basics macroeconomic concepts, useful to understand the real effects of economic policies and the functioning of monetary policy, we study credit market imperfections and how they can cause financial fragility phenomena that can lead to financial and real crises.

Programme

1)       Course objectives and contents

The course will provide students with models to understand how (and why) money and financial variables matter from a macroeconomic perspective. The importance of credit and financial market imperfections for the conduct of monetary policy and for real economic activity will be stressed. At the end of the course the student should be able to understand macroeconomic stabilization policies, the main monetary policy operating procedures, the role of financial intermediation and the effects of financial fragility on the economic system.    

 2)       Main topics

Block 1. Basic macroeconomic concepts (neo-classical model, IS-LM model, the liquidity trap, the AD-AS model, the Phillips curve, the yield curve);

Block 2. Monetary policy operating procedures (the money multiplier, the central bank balance sheet, the ECB's monetary policy corridor, the Taylor rule, inflation targeting, post-crisis non conventional policies);

Block 3. Asymmetric information and financial intermediation; credit market imperfections and their effects on economic activity (from Modigliani-Miller to the financial hierarchy; credit rationing: Stiglitz e Weiss (1981), bank runs and financial panics: Diamond e Dybvig (1984), delegated monitoring: Diamond (1984));

Block 4. Financial fragility and monetary policy transmission mechanisms to real activity (the traditional interest rate channel (money view), asymmetric information effects and the credit channel (credit view): lending view (Bernanke and Blinder (1988)) and the financial accelerator).

The course will include traditional lectures and practice session. The final evaluation will be based on a final written test that includes two questions on the first part (Blocks 1 and 2) and two questions on the second part (Blocks 3 and 4). In order to pass the exam the student must obtain a sufficient mark both in the first and in the second part.