Stockholm University, Uppsala University and the Riksbank Nils Gottfries, Lars E. O.

Svensson, Johan Sderberg Revised 15 May 2012

Reading List for Ph D Course in Monetary Economics 2012

Main text: Gali, Jordi, 2008, Monetary 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, Michael, 2003, Interest and Prices Foundations of a Theory of Monetary Policy, Princeton University Press. References marked ** should be read carefully. References marked * can be read more supercially. 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. *Christiano, Lawrence. J., Martin Eichenbaum and Charles L.Evans, 1999, Monetary policy shocks: What have we learned and to what end?, in M. Woodford and J. B. Taylor, editors, Handbook of Macroeconomics. Elsevier, Amsterdam. Calvo, G. A., 1983, Staggered prices in a utility-maximizing framework, Journal of Monetary Economics, 12, 383 398. Chari, V., P. J. Kehoe and Elen. R. McGrattan, 2000, Sticky price models of the business cycle: Can the contract multiplier solve the persistence problem?, Econometrica 68, 1151 1179 *Clarida, R., Jordi Gal and Mark Gertler, 1999, The science of monetary policy: A New Keynesian perspective, Journal of Economic Literature 37, 1661 1707.

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 specication 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

**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 Drill, 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 dierence 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 Dierence 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. Lind, Jesper, 2003, The Eects of Permanent Technology Shocks on Hours and Labor Productivity in the RBC Model, Sveriges Riksbank Working Paper Series No. 161. Sderlind, 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

** Grioli, 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, Jeery D and Thomas Laubach, 2003, Rule-of-Thumb Behaviour and Monetary Policy , European Economic Review 47, 791-831. *Amato, Jeery 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 Eects 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, Jerey, 2000, Habit Formation in Consumption and its Implications for Monetary Policy Models, American Economic Review 90, 367-390. Fisher, J., 2006 , The Dynamic Eects of Neutral and Investment-Specic 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

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 Human, 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 Gal, and Mark Gertler, 1999, The science of monetary policy: A New Keynesian perspective, Journal of Economic Literature 37, 16611707. **Sderlind, 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. Sderberg, J., 2011, Customer Markets and the Welfare Eects 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. Sderstrm, 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.

**Giordani, Paolo and Paul Sderlind, 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 Sderstrm, 2008, Robust monetary policy in the NewKeynesian framework, Macroeconomic Dynamics 12, 126-135. Dennis, Richard, Kai Leitemo, and Ulf Sderstrm, 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 Eects 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-Specic 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.

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-specic 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-thejob search , and persistent unemployment, Labour Economics 12, 407-428. **Gottfries, Nils and Johan Sderberg, 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-Groh, 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.

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-Groh, S. and Martin Uribe, 2003, Closing Small Open Economy Models, Journal of International Economics 61, 163 185. Adolfson, Malin, Lasen Stefan, Lind, 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, Lasen Stefan, Lind, 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, Lasen Stefan, Lind, 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 Sderstrm, 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