Economics and Finance

The Monetary Economics and Policy course aims at teaching the main elements of a contemporary monetary economy. First of all, students are introduced to monetary and financial relations through simplified accounting schemes. They then learn the individual choices of the main institutional sectors of the economy (households, firms, financial intermediaries and public sector) and the market mechanisms though which the behaviour of individual agents is made mutually compatible. Last, they deepen the analysis of monetary policy and study the behaviour of the central banks of the main industrialized countries. The knowledge of a contemporary monetary economy requires to understand the functioning of some important institutions (starting from the central bank and monetary and financial markets), to master analytical instruments and to comprehend the actual working of different monetary policy regimes. The acquisition of all the tools that are necessary to achieve the teaching targets is guaranteed by specific sections of the program. Particular attention is placed on the actual functioning of the markets for money, bank liquidity, securities and credit. A specific part of the course is devoted to the actual realization of monetary policy. In this way, students can learn both the basic theoretical notions, which are useful to understand the real economic world and which are necessary for those who wish to continue the study of economics, and the actual functioning of money and financial markets, of particular importance for those who are interested in finance and wish to enter the labour market after the Laurea. Acquired knowledge Students passing the exam know the functioning of a contemporary monetary economy. They hence know the way money and financial markets operate, as well as the behaviour of the central banks of the main industrialized countries. These students master the basic terminology and the basic accounting of a contemporary monetary economy; they understand the way households allocate savings and financial intermediaries decide on the composition of both sides of their balance sheets, the investment choices by firms and the financing of accumulation, the variables explaining the financial behaviour of the government and the concrete realization of monetary policy. Specific knowledge refers to the elements underlying the dynamics of financial asset prices, both in spot and in forward markets, and the determination of short-term and long-term interest rates. The markets for derivatives are known at an elementary level. Students know the construction and the meaning of the yield curve, the re-equilibrating mechanisms of money and financial markets, the relation between the equilibrium of the financial system and macroeconomic equilibrium. Finally, they know the transmission mechanism of monetary policy, in closed and open economies, the existing monetary policy regimes and the cumulative endogenous dynamics triggered by financial phenomena. Acquired skills Students passing the exam are able to understand the public debate on monetary and financial matters, as well as the main parts of National and International reports by private and public institutions (starting from the monthly bulletins and the annual reports by central banks, the Bank for International Settlements, the International Monetary Fund and the other main international institutions). They may read without difficulties scientific papers at an intermediate level. They are also able to analyse the dynamics of monetary variables, of financial asset prices and of interest rates, and to obtain from the yield curve the expected short-term forward rates. They can solve simple portfolio choice problems. Finally, they can understand the actual choices of central banks and their public announces, and to derive their effects on the (current and expected) main economic variables.