Economics of Central Banking

Module description

This course covers topical and technically advanced issues of relevance to central banks. The focus of this course is on the analytical methods modern central banks use to model and understand macroeconomic fluctuations. The course begins by examining the aims of monetary policy and then analyses the instruments available to central banks to achieve these aims. In doing so, it reviews the arguments for and against central banks’ independence. The later part of the course studies the models used at central banks for policy analysis. The final part of the course focuses on monetary policy in crisis times, including monetary policy making at the zero lower bound and the interaction between macroeconomy and the financial sector.

Full module specification

Module title:Economics of Central Banking
Module code:BEEM013
Module level:M
Academic year:2016/7
Module lecturers:
  • Dr Engin Kara - Convenor
Module credit:15
ECTS value:






Duration of module: Duration (weeks) - term 2:


Module aims

This module aims at providing students with a solid base in monetary economics at an advanced level. By the end of this module, students will be able to analyse current monetary policy issues using theoretical and conceptual frameworks in the existing literature.

ILO: Module-specific skills

  • 1. recognise the current challenges facing central banks.
  • 2. demonstrate understating of the key elements of macroeconomic models used at central banks.
  • 3. critically evaluate the models’ strengths and weaknesses.
  • 4. analyse recent economic news using the models.

ILO: Discipline-specific skills

  • 5. demonstrate increased understanding of economic theory.
  • 6. apply economic reasoning to current monetary policy issues.

ILO: Personal and key skills

  • 7. critically Eevaluate arguments and evidence.
  • 8. communicate complex arguments to non-specialists.

Learning activities and teaching methods (given in hours of study time)

Scheduled Learning and Teaching ActivitiesGuided independent studyPlacement / study abroad

Details of learning activities and teaching methods

CategoryHours of study timeDescription
Scheduled Learning and Teaching activities33 (3 per week)Lectures
Guided independent study55 (5 per week)Reading
Guilded Independent Study62 (approx. 6 per week)Preparing problem set answers and working on assignments

Formative assessment

Form of assessmentSize of the assessment (eg length / duration)ILOs assessedFeedback method
Practice ProblemsVaries1-8Oral/written

Summative assessment (% of credit)

CourseworkWritten examsPractical exams

Details of summative assessment

Form of assessment% of creditSize of the assessment (eg length / duration)ILOs assessedFeedback method
Examination1003 hours1-8Oral/written

Details of re-assessment (where required by referral or deferral)

Original form of assessmentForm of re-assessmentILOs re-assessedTimescale for re-assessment
ExaminationExamination 100% 3 hours1-8August Examination Period

Syllabus plan

The course covers 9 topics:

  •  Time Inconsistency and Central Bank Independence  
  • Taylor Rules
  • Rational Expectations and Consumption.
  • Phillips Curve
  • The Modern New Keynesian Model
  • The Smets and Wouters Model
  • Optimal Monetary Policy
  • Liquidity Trap and the Quantitative Easing
  • Financial Frictions.

Indicative learning resources - Basic reading

-         Romer, Advanced Macroeconomics, McGraw-Hill Advanced Series in Economics, New York, 2012.

-         Walsh, Monetary Theory and Policy, MIT Press, 2010.

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