Stockholm University, Uppsala University and the Riksbank Nils Gottfries, Lars E. O. Svensson, Johan Söderberg Revised 15 May 2012
Reading List for Ph D Course in Monetary Economics 2012 Main text: Gali, Jordi, 2008, Monetary Policy, Policy, In‡ation, and the Business Cycle:
An Introduction to the New Keynesian Framework, Princeton University Press. Other useful books:
Walsh, Carl. E., 2010, Monetary Theory and Policy (third edition), MIT Press, Cambridge, Mass. Woodford, oodford, Michael, Michael, 2003, Interest Interest and Prices Prices – Foundation oundationss of a Theory Theory of Monetary Policy, Princeton University Press. Reference Referencess marked ** should be read carefully carefully.. Reference Referencess marked * can be read more super…cially. Other references are given as suggested further reading.
The Basic New Keynesian Model **Gali, Jordi, 2008, Monetary Policy, In‡ation, and the Business Cycle, chapter 2-4. *Christia *Christiano, no, Lawrence Lawrence.. J., Martin Martin Eichenbaum Eichenbaum and Charles Charles L.Evans, L.Evans, 1999, Monetary policy shocks: What have we learned and to what end?, in M. Woodford and J. B. Taylor, aylor, editors, Handbook of Macroecono Macroeconomics mics.. Elsevier, Elsevier, Amsterdam. Calvo, G. A., 1983, Staggered prices in a utility-maximizing framework, Journal of Monetary Economics, 12, 383–398. Chari, Chari, V., P. J. Kehoe and Elen. R. McGrattan, McGrattan, 2000, Sticky Sticky price models of the business cycle: Can the contract multiplier solve the persistence problem?, Econometrica 68, 1151–1179 *Clarida, R., Jordi Galí and Mark Gertler, 1999, The science of monetary policy: A New Keynesian perspective, Journal of Economic Literature 37, 1661–1707.
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Fischer, Stanley, 1977, Long-term contracts, rational expectations, and the optimal money supply rule, Journal of Political Economy 85, 191–205 Goodfriend, M. and Robert. G. King, 1997, The new neoclassical synthesis and the role of monetary policy, NBER Macroeconomics Annual, pages 231–283. McCallum, Bennet. T. and Edward Nelson, 1999, An optimizing IS-LM speci…cation for monetary policy and business cycle analysis, Journal of Money, Credit, and Banking, 31, 296–316 Roberts, J. M., 1995, New Keynesian economics and the Phillips curve, Journal of Money, Credit, and Banking, 27, 975–984. Taylor, John. B., 1979, Staggered wage setting in a macro model, American Economic Review, 69, 108–113 Uhlig, Harald, 1999, A toolkit for analyzing nonlinear dynamic stochastic models easily, in R. Marimon and A. Scott, editors, Computational Methods for the Study of Dynamic Economies. Oxford University Press Walsh, Carl. E., 2003, Monetary Theory and Policy, The MIT Press, Cambridge, Mass, Ch. 5. Woodford, Michael, 2003, Interest and Prices: Foundations of a Theory of Monetary Policy, Princeton University, Ch. 1-3
In‡ation Persistence and Sticky Information Ball, Lawrence, 1994, Credible disin‡ation with staggered price-setting, American Economic Review 84, 282–289. *Estrella, A. and J. C. Fuhrer, 2002, Dynamic inconsistencies: Counterfactual implications of a class of rational-expectations models, American Economic Review, 92, 1013–1028. Fuhrer, J. C. and G. Moore, 1995, In‡ation persistence, Quarterly Journal of Economics, 110, 127–159. **Gali, Jordi. and Mark Gertler, 1999, In‡ation dynamics: A structural econometric analysis, Journal of Monetary Economics, 44, 195–222, *Gali, Jordi, Mark Gertler and David Lopez-Salido, 2001, European in‡ation dynamics, Euoropean Economic Review 45, 1237-1270. **Mankiw, N. Gregory, 2001, The inexorable and mysterious tradeo¤ between in‡ation and unemployment, Economic Journal 111, C45–C61
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**Mankiw, N. Gregory. and Ricardo Reis, 2002, Sticky information versus sticky prices: A proposal to replace the New Keynesian Phillips curve, Quarterly Journal of Economics 117, 1295–1328. *Rudd, Jeremy, and Karl Whelan, 2007, Modeling in‡ation dynamics: a critical review of recent research, Journal of Money, Credit and Banking, 39 (supplement), 155-170.
Solving Rational Expectations Models *Anderson, G, 1999, The Anderson-Moore Algorithm: A MATLAB Implementation, mimeo, Federal Reserve Board. Backus, David. K. and John Dri…ll, 1986, The consistency of optimal policy in stochastic rational expectations models, discussion paper no. 124, Centre for Economic Policy Research. **Blanchard, Olivier. J. and C. M. Kahn, 1980, The solution of linear di¤erence models under rational expectations, Econometrica, 48, 1305–1311. Christiano, Lawrence.J., 2002, Solving Dynamic Equilibrium Models by a Method of Undetermined Coe¢cients, Computational Economics 20, Issue 1-2. Currie, David. and Paul Levine, 1993, Rules, Reputation and Macroeconomic Policy Coordination, Cambridge University Press. Dennis, Richard, 2001, Optimal policy in rational-expectations models: New solution algorithms, working paper no. 2001-09, Federal Reserve Bank of San Francisco. King, Robert G. and Mark W. Watson, 1998, The Solution of Singular Linear Di¤erence Systems under Rational Expectations, International Economic Review 39. ** Klein, Paul, 2000, Using the Generalized Schur Form to Solve a Multivariate Linear Rational Expectations Model, Journal of Economic Dynamics and Control 24, 1405–1423. Lindé, Jesper, 2003, The E¤ects of Permanent Technology Shocks on Hours and Labor Productivity in the RBC Model, Sveriges Riksbank Working Paper Series No. 161. Söderlind, Paul, 1999, Solution and estimation of RE macromodels with optimal policy, European Economic Review, 43, 813–823. Sims, Christopher A., 2000, Solving Linear Rational Expectations Models, www.princeton.edu/~sims/. 3
Tervala, Juha, Using the Matlab version of Dynare, mimeo, January 2008.
Numerical Simulation of Dynamic Models ** Gri¤oli, Tommaso Mancini, 2007, Dynare User Guide: An introduction to the solution & estimation of DSGE models. (Available at http://www.cepremap.cnrs.fr/juillard/mambo /download/manual/Dynare_UserGuide_WebBeta.pdf) Dynare Team - Dynare Manual (Available at http://www.cepremap.cnrs.fr/juillard/mambo /download/manual/manual.pdf)
Consumption and Investment Dynamics Abel, A.B., 1990, Asset prices under habit formation and catching up with the Joneses, American Economic Review 80, Papers and Proceedings, 38–42. Amato, Je¤ery D and Thomas Laubach, 2003, Rule-of-Thumb Behaviour and Monetary Policy”, European Economic Review 47, 791-831. *Amato, Je¤ery D and Thomas Laubach, 2004, Implications of Habit Formation for Optimal Monetary Policy, Journal of Monetary Economics 51, 305-325. **Christiano, Lawrence J., Martin Eichenbaum, and Charles L. Evans. 2005, Nominal Rigidities and the Dynamic E¤ects of a Shock to Monetary Policy, Journal of Political Economy 113, 1–45. Christiano, Lawrence and Richard Todd, 1996, Time to Plan and Aggregate Fluctuations, Federal Reserve Bank of Minneapolis Quarterly Review, Vol 20, 14-27. Cooper, Russell and John Haltiwanger, 1993, The Aggregate Implications of Machine Replacement: Theory and Evidence, American Economic Review 83, 360-382. **Fuhrer, Je¤rey, 2000, Habit Formation in Consumption and its Implications for Monetary Policy Models, American Economic Review 90, 367-390. Fisher, J., 2006 , The Dynamic E¤ects of Neutral and Investment-Speci…c Technology Shocks, Journal of Political Economy 114, 413-451. Gourio, Francois and Anil K Kashyap, Investment spikes: New facts and a general equilibrium exploration, Journal of Monetary Economics 54, 1–22 4
Groth, Charlotta and Hashmat Khan, 2007, Investment Adjustment Costs: Evidence from UK and US Industries, Bank of England Working Paper No. 332. Greenwood, Jeremy, Zvi Hercowitz, and Gregory Hu¤man, 1988, Investment, Capacity Utilization, and the Real Business Cycle, American Economic Review 78, 402-17. *Hayashi, F., 1982, Tobin’s marginal q , and average q : a neoclassical interpretation”, Econometrica 50, 215-224. Kydland, F. and E. Prescott, 1982, Time-to-Build and Aggregate Fluctuations, Econometrica , 1345-1370. Sveen, Tommy and Lutz Weinke, 2007, Lumpy investment, sticky prices, and the monetary transmission mechanism, Journal of Monetary Economics 54, 23–36
Optimal Monetary Policy **Gali, Jordi, 2008, Monetary Policy, In‡ation, and the Business Cycle, Ch. 5. **Clarida, Richard, Jordi Galí, and Mark Gertler, 1999, The science of monetary policy: A New Keynesian perspective, Journal of Economic Literature 37, 16611707. **Söderlind, Paul, 1999, Solution and estimation of RE macromodels with optimal policy, European Economic Review 43, Papers and Proceedings, 813-823. Dennis, Richard, 2007, Optimal policy rules in rational-expectations models: New solution algorithms, Macroeconomic Dynamics 11, 31-55. Söderberg, J., 2011, Customer Markets and the Welfare E¤ects of Monetary Policy, Journal of Monetary Economics, 58, 206-219. **Walsh, Carl E., 2003, Implications of a changing economic structure for the strategy of monetary policy, in Monetary Policy and Uncertainty: Adapting to a Changing Economy, Federal Reserve Bank of Kansas City. Söderström, Ulf, 2002, Monetary policy with uncertain parameters, Scandinavian Journal of Economics 104, 125-145. **Cateau, Gino, 2006, Guarding against large policy errors under model uncertainty, Working Paper No. 2006-13, Bank of Canada. Cateau, Gino, 2007, Monetary policy under model and data-parameter uncertainty, Journal of Monetary Economics 54, 2083-2101.
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**Giordani, Paolo and Paul Söderlind, 2004, Solution of macromodels with Hansen-Sargent robust policies: Some extensions, Journal of Economic Dynamics and Control 28, 2367-2397. Hansen, Lars P. and Thomas J. Sargent, 2007, Robustness, Princeton University Press. *Leitemo, Kai and Ulf Söderström, 2008, Robust monetary policy in the NewKeynesian framework, Macroeconomic Dynamics 12, 126-135. Dennis, Richard, Kai Leitemo, and Ulf Söderström, 2009, Methods for robust control, Journal of Economic Dynamics and Control, forthcoming.
Wage Rigidity and Labor Market Frictions **Gali, J., 2008, Monetary Policy, In‡ation, and the Business Cycle, chapter 6 . *Blanchard, O. and J. Gali, 2007, Real Wage Rigidities and the New Keynesian Model, Journal of Money, Credit, and Banking 39, Supplement, 35-65. Blanchard, O. and J. Gali, 2010, Labor Markets and Monetary Policy: A New Keynesian Model with Unemployment, American Economic Journal - Macroeconomics, 2, 1-30. Ravn, M., and Simonelli, S., 2007, Labor Market Dynamics and the Business Cycle: Structural Evidence for the United States, Scandinavian journal of Economics 109, 743-777. *Christiano, L., Eichenbaum, M., Evans, C., 2005, Nominal Rigidities and the Dynamic E¤ects of a Shock to Monetary Policy, Journal of Political Economy 113, 1-45. Christiano, L., Trabandt M. and Walentin, K. 2011, DSGE Models for Monetary Policy Analysis, in Handbook of Monetary Economics, Volume 3a, Elsevier, Friedman, Benjamin M., and Michael Woodford, red, Elsevier. Carlsson, M. and Westermark, A., 2011, The New Keynesian Phillips Curve and Staggered Price and Wage Determination in a Model with Firm-Speci…c Labor, Journal of Economic Dynamics and Control 35, 579–603. Erceg, C., Henderson, D., Levin, A., 2000. Optimal monetary policy with staggered wage and price contracts, Journal of Monetary Economics 46, 281-313. Gertler, Mark and Trigari, A., 2009, Unemployment Fluctuations with Staggered Nash Wage Bargaining, Forthcoming in Journal of Political Economy.
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Merz, M., 1995, Search in the labor market and the real business cycle, Journal of Monetary Economics 36, 269-300 *Gertler, M., Sala, L.and Trigari, A., 2008, An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining, Journal of Money, Credit and Banking 40, 1713-1764. Trigari, A., 2009, Equilibrium Unemployment, Job Flows and In‡ation Dynamics, Journal of Money, Credit and Banking 41, 1-33. Akerlof, George, Janet Yellen, 1985, A Near-Rational Model of the Business Cycle, with Wage and Price Inertia, Quarterly Journal of Economics 100, 823838. Altig, D., Lawrence Christiano, Martin Eichenbaum, and Jesper Linde, 2005, Firm-speci…c capital, nominal rigidities and the business cycle, NBER Working Paper 11034. *Ball, Lawrence, and DavidRomer, 1990, Real Rigidities and the Non-Neutrality of Money, Review of Economic Studies 57, 183-203. *Chari, V.V., P. Kehoe, and Ellen McGrattan, 2000, Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem? Econometrica 68, 1151-1179. **Eriksson, Stefan, and Nils Gottfries, 2005, Ranking of job applicants, on-the job search , and persistent unemployment, Labour Economics 12, 407-428. **Gottfries, Nils and Johan Söderberg, 2010, Do Sticky Prices Make Sense? mimeo, Uppsala University. *Kimball, Miles, 1995, The Quantitative Analytics of the Basic Neomonetarist Model. Journal of Money, Credit and Banking 27, 1241-1277. Mankiw, Gregory, 1985, Small Menu Costs and Large Business Cycles, Quarterly Journal of Economics 100, 529-537. Ravn, Morten O., Stephanie Schmitt-Grohé, and Martin Uribe, 2006, Deep Habits, Review of Economic Studies 73, 195-218. *Ravn, Morten, and Severino Simonelli, 2007, Labor Market Dynamics and the Business Cycle: Structural Evidence for the United States, Scandinavian journal of Economics 109, 743-777. Taylor. John, 1980, Aggregate Dynamics and Staggered Contracts, Journal of Political Economy 88, 1-23.
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Taylor. John, 1999, Staggered price and wage setting in macroeconomics, in J. Taylor and M. Woodford, eds, Handbook of Macroeconomics, Vol. 1B, Elsevier, Amsterdam.
Open Economy **Gali, Jordi, 2008, Monetary Policy, In‡ation, and the Business Cycle, chapter 7. *Gali, Jordi, and Tommaso Monacelli, 2005, Monetary policy and exchange rate volatility in a small open economy, Review of Economic Studies 72, 707-734. * Schmitt-Grohé, S. and Martin Uribe, 2003, Closing Small Open Economy Models, Journal of International Economics 61, 163–185. Adolfson, Malin, Laseén Stefan, Lindé, Jesper and Villani, M, 2005, The Role of Sticky Prices in an Open Economy DSGE Model: A Bayesian Investigation, Journal of the European Economic Association 3, 444-457. Adolfson, Malin, Laseén Stefan, Lindé, Jesper and Villani, M, 2007, Bayesian Estimation of an Open Economy Model with Imperfect Pass-Through, Journal of International Economics 72, 481-511. Adolfson, Malin, Laseén Stefan, Lindé, Jesper and Villani, M, 2008, Evaluating an Estimated New Keynesian Small Open Economy Model, Journal of Economic Dynamics and Control, forthcoming. Campa, J. M. and Linda S.Goldberg, 2002, Exchange rate pass-through into import prices: A macro or micro phenomenon? Working Paper No. 8934, National Bureau of Economic Research. Corsetti, G. and Paolo Pesenti, 2001, Welfare and macroeconomic interdependence, Quarterly Journal of Economics 116, 421–445. Devereux, M. B. and C. Engel, 2002, Exchange rate pass-through, exchange rate volatility, and exchange rate disconnect, Journal of Monetary Economics 49, 913–940. Lane, Philip R., 2001, The new open economy macroeconomics: A survey, Journal of International Economics, 54, 235–266. Leitemo, Kai and Söderström, Ulf, 2002, Simple monetary policy rules and exchange rate uncertainty, manuscript, revised version of Sveriges Riksbank Working Paper No. 122. Obstfeld, Maurice and Rogo¤, Kenneth, 2000, New directions for stochastic open economy models, Journal of International Economics 50, 117–153. 8
Obstfeld, M. and Rogo., K., 1995, Exchange rate dynamics redux, Journal of Political Economy 103, 624–660. Preston, B. and A. Justiniano, Can Structural Small Open Economy Models Account for the In‡uence of Foreign Shocks?, working paper, Columbia University. Smets, Frank and R. Wouters, 2002, Openness, imperfect exchange rate passthrough and monetary policy, Journal of Monetary Economics 49, 947–981. Svensson, Lars E. O., 2000, Open-economy in‡ation targeting, Journal of International Economics 50, 155–184.
Practical Monetary Policy See homepage of Lars E. O. Svensson: http://people.su.se/~leosven/und/2012/MonPol2012/Svensson-graduate-lectureson-practical-monetary-policy-2012.htm
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