Data on the course

Show instruction and examinations
ECOM-R319 Advanced Macroeconomics 3: Monetary Policy Models, 5 cr 
Code ECOM-R319  Validity 01.01.2017 -
Name Advanced Macroeconomics 3: Monetary Policy Models  Abbreviation Advanced Macroe 
Scope5 cr   
TypeAdvanced studies
  GradingGeneral scale 
    Can be taken more than onceno
Unit Master's Programme in Economics 

Antti Ripatti 

Target group 

Master’s Programme in Economics (Research track). Open also to students of the doctoral programme in economics.


First spring term, annually in the third period

Learning outcomes 

After the course, the student should

  • Be able to calculate stylised facts using macroeconomic data
  • Be able to linearise and solve linear dynamic models
  • Be able to derive and solve the New Keynesian model and compare the welfare effects of alternative monetary policy rules
  • Understand optimal monetary policy in the basic New-Keynesian framework
  • Understand the time-consistency problem in the basic New-Keynesian framework
  • Understand the effect of the zero lower bound
  • Be able to describe the interaction between monetary and fiscal policy
  • Be able to describe how the open-economy setting alters the previous results


Completion methods 

The course consists of lectures (24 hours) and exercise sessions (8 hours), where solutions to the homework assignments are discussed. The lectures and exercise sessions are not mandatory. There is a written final exam based on the lecture material and the homework assignments. The homework assignments consist of analytical exercises. They familiarise the student with the theory and calculations typically required in applying and extending the models that have been studied in the lecture. They also involve the interpretation of model economies.


The course builds upon the contents of Advanced Macroeconomics 1 and 2.


The course starts with an introduction to business cycle facts and methods. Then we present the main theoretical concepts and methods for solving and calibrating linear stochastic dynamic general equilibrium (DSGE) models. Then we study why the monetary policy is neutral in classical, RBC-type macro models and explain a special case where it is not. The classical model is augmented with imperfect competition and price rigidities, leading to the canonical new Keynesian model. Next, various monetary policy rules are studied in this framework. We also study the zero lower bound restriction of nominal interest rates on monetary policy and the resulting extensions to the basic framework. This builds a bridge to study the interaction of fiscal and monetary policies. Discretion and commitment in monetary policy making is introduced. We also study the open economy dimension of monetary policy.

Study materials and literature 

The course material will mainly draw elements from the following books and articles:

  • Chapters 1–5 and 7 of Jordi Galí's book Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework, 2nd edition, Princeton University Press. (The 1st edition is also suitable.) 
  • Matthew Canzoneri, Robert Cumby, Behzad Diba, Chapter 17 - The Interaction Between Monetary and Fiscal Policy, In: Benjamin M. Friedman and Michael Woodford, (Editors), Handbook of Monetary Economics, Elsevier, 2010, Volume 3, Pages 935–999
  • Other course material will be provided during the course


Activities and teaching methods in support of learning 

The course material is delivered through the course website. Problem sets are designed to support learning of the course material.

Assessment practices and criteria 

The grade on a scale from 0 (fail) to 5 is based on the points earned in the final exam (70%) and in the homework assignments (30%).


Current and future instruction
Functions Name Type cr Teacher Schedule
registration period has ended Advanced Macroeconomics 3: Monetary Policy Models  Lecture Course  Antti Ripatti  19.01.21 -05.05.21

Future examinations
No examinations in WebOodi