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Macroeconomics II

Module Code: EC7006

Monetary Policy and the New Keynesian Business Cycle

  • ECTS Credit: 5
  • Mandatory/Optional: Optional
  • Module Coordinator: Professor Davide Romelli

Module Delivery

The module will be delivered through a combination of lectures (9 hours) and tutorials (3 hours). A major element of the course is a set of graded weekly problem sets, such that continuous assessment is an essential feature.

Learning Outcomes

On completion of the course, students will be able to:

  1. exposit and critically appraise modern theoretical models of the determination of the major macroeconomic variables in light of empirical evidence;
  2. use appropriately the main techniques and methodologies employed in macroeconomic theory;
  3. elucidate the role of money in explaining business cycles under different modelling strategies.


The Monetary Policy and the New Keynesian Business Cycle part focuses on central bank targets, time inconsistency and optimal monetary policy. We will look at Taylor rules and study a classical monetary model that bases macroeconomic dynamics on microeconomic foundations. We will also discuss a simple New Keynesian model and review the strengths and weaknesses of this type of model.


Assessment for the module is based on a combination of problem sets and a final examination.