CENTRAL BANKING
Instructional goals
The course analyses the economic policies of the ECB.
Intended learning outcomes
Knowledge of the framework of monetary policy in the Euro area with reference to the primary inflation objective; taking into consideration also the secondary objectives such as the performance of the economy in the European Union and climate change.
Course Contents
The primary objective of monetary policy is price stability; monetary policy should be coherent with the policies of the Union, given the primary objective. Central bank policies on climate change are part of the framework to the extent that they do not collide with the primary objective of price stability. The course will explore the link between the primary mandate of the ECB and secondary objectives, including climate change. The course will primarily deal with the conventional instruments of monetary policy that today have regained center stage. A view of unconventional
Reference Books
Material produced by the ECB, IMF, Bank of Italy; academic contributions.
Teaching Methods
Slides, notes for discussions, proposals of topics to be specifically addressed. Presentations.
Assessment Method
Homeworks, presentations, class discussions.
Thesis assignment criteria
Topics that have been covered in class, in homeworks, exams.
Week 1
Review of main topics; organisational issues. Analysis of the functions of the ECB and main instruments. Primary and secondary objectives. General discussion (based on key issues). Stylized facts on climate change. The policy problem associated to the transition toward net-zero emissions.
Week 2
Monetary policy before the global financial crisis. The first phase of unconventional monetary policy (2008-2010): the ‘reparation’ of the transmission mechanism and the ‘separation principle’. Evidence.
Week 3
The sovereign crisis: SMP and OMT. How it worked. Evidence from studies. Description of events in the sovereign crisis, including macroeconomic adjustment programmes, analysis of impact of measures. Presentation of 1 group on monetary and fiscal policy in the euro area. General discussion
Week 4
The environment of low inflation after 2012. New wave of unconventional measures (ABS, APP, PEPP), TLTROs, negative rates. How do they work (channel of transmission for each of the instruments).
Week 5
Analysis of the econometric evidence. General discussion
Week 6
Analysis of the econometric evidence. General discussion.
Week 7
Monetary policy after the strategy review: application of forward guidance, exit from Covid, supply constraints, start of phasing out of non-standard measures, start of the tightening cycle.
Week 8
The fight against inflation starting in 2021 by a return to traditional policies based on policy interest rates. The challenge for monetary policy at the current juncture.
Week 9
Climate change: facts on trends, externalities, economic costs, and public policies. General discussion.
Week 10
Climate change. Impact on financial markets and banks. Financial stability
Week 11
Climate change related shocks and monetary policy. Potential inflationary shocks of the transition. Physical risk related shocks. (presentation of 1 group)).
Week 12
Monetary policy: support of secondary objectives via asset purchases and collateral policies, risk management and other initiatives. General discussion.