Monetary Policy

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1. Money – its forms, functions and basic features. Brief history: from physical (commodity) to deposit money. Phenomenon of cryptocurrencies. Multiplier mechanism – monetary base, broad measures of money, money creation multiplier. Contemporary definitions of money – 3 hrs

2. Monetary policy as an element of economic policy – 5 hrs

a/ The concept of policy mix. The cooperation between a central bank and

a government

b/ Central bank’s functions: money issue monopoly, state’s bank, reserve bank, banks’ bank

c/ Leading central banks of the world and their objectives

d/ The exchange rate policy specificity

e/ Independence of a central bank and its evolution

3. The institutional framework of monetary policy – 3 hrs

a/ Two-tier banking system. The role of interbank market

b/ Payments systems. Liquidity position of a banking system

c/ The functioning of money market (participants, instruments)

d/ Central bank’s and commercial banks’ balance sheets

4. Rules versus discretion monetary policies. Taylor rule. Monetary policy strategies – 2 hrs

• Policy of monetary targeting

• Strategy of direct inflation targeting (DIT)

• Exchange rate targeting

• Mixed (eclectic or hybrid) strategies

5. Macroeconomic framework of monetary policy conduct – 5 hrs

a/ The notion of price stability. The medium-term orientation

b/ Three main instruments of monetary policy: open market operations, minimum required reserves, standing facilities (credit/deposit operations)

c/ Interventions on foreign exchange market

d/ Economic and monetary analyses as two bases of monetary strategy

e/ Accountability and transparency of central bank’s activities

f/ Unorthodox (non-standard, unconventional) monetary policy -quantitative easing versus tightening

g/ Differences in monetary policies of developing/emerging markets and developed countries

6. The role of commercial banks in national economy – 3 hrs

Principles of banks’ functioning: capital position and banks’ financing, lending possibilities. The most significant risks in banks’ activities. Systemic important banks - “too big to fail”. Monetary policy transmission via banking system. Transmission mechanism and basic channels – interest rate, exchange rate, credit, inflationary expectations and wealth ones

7. The central banking of the US and EU – 3 hrs

a/ The mandate and organization of the Federal Reserve System

b/ Peculiarities of the European System of Central Banks and Eurosystem.

The decisive role of the European Central Bank, its decision-making bodies and monetary policy strategy

c/ The American and European financial supervisory architecture

8. The currency integration within the European Union – 2 hrs

a/ The legacy of the European Monetary System (1979-1998)

b/ Three stages of the Economic and Monetary Union (EMU)

c/ The expansion of the euro zone. The international role of common European currency

d/ Turbulence of years 2010-2013 – a crisis of euro or the EMU?

9. Financial stability – a new challenge for central banks – 4 hrs

Essential problem of financial stability: crisis prevention and management. Financial crises’ causes, systemic risk and its time (pro-cyclicity, financial cycle) and structural dimensions. Costs of a crisis and its prevention. Main regulatory changes after the Great Recession – new role of central banks. Macroprudential challenges: independence, inactionbias, political cycle, business and financial cycles. Central banks’ behaviour in crisis situation

- S. G. Cecchetti „Money, Banking, and Financial Markets”, 2nd Edition, McGraw-Hill International Edition 2010

- A. Delivorias “Monetary policy of the European Central Bank. Strategy, conduct and trends. In-depth analysis”, European Parliamentary Research Service, February 2015, website

- F. S. Mishkin „The Economics of Money, Banking, and Financial Markets” (10 Edition), Prentice Hall 2012, website

- The Monetary Policy of the ECB”, ECB – Eurosystem, Frankfurt am Main 2011, website

- Annual Reports of the ECB, website

- Monthly Bulletins of the ECB, website

- „Financial Times”, „The Economist”

KNOWLEGDE

Student has advanced knowledge about the contemporary international and global finance environment, understands the changes taking place in the international financial environment and is familiar with the concept of risks and types of risks occurring on international financial markets, as well as the impact these risks have on the modern economy, organizations (enterprises, financial institutions).

SKILLS

Student is able to assess economic and financial phenomena taking place on the national and global scale, determine the opportunities and threats resulting from them for business entities and national economies and their mutual relations against the background of changing global conditions.

SOCIAL COMPETENCES

Student is able to formulate and substantiate critical assessment of economic issues, including financial and social issues, and he/she is aware of the shortcomings and unreliability of his/her knowledge.

- preparation and presentation during classes of reports on key central banks’ policies;

- passing a final test proving a good command of issues related to monetary policy as well as questions discussed during the lectures

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