Monetary Theory and Policy

This course introduces students to New Keynesian DSGE models. The basic model equations are derived carefully, and model solution techniques are discussed. Further, numerical solutions of the models are obtained and the models are simulated and analyzed using Dynare in MATLAB. Possible extensions to the core model that may be treated in class include an analysis of optimal monetary policy and the effects of exogenous shocks. After completing the course, students understand the dynamic mechanisms of nominal rigidities and the policy tradeoffs facing monetary policy. Mechanically, students are able to derive, solve and simulate simple DSGE models and are capable toread and understand more elaborate models found in the literature.