Stockholm University, Uppsala University and the Riksbank

Nils Gottfries, Lars E. O. Svensson, Johan Söderberg

Revised 15 May 2012

Reading List for Ph D Course in Monetary Eco-nomics 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 ofMonetary Policy, Princeton University Press.

References marked ** should be read carefully. References marked * can beread more super�cially. Other references are given as suggested further reading.

The Basic New Keynesian Model

**Gali, Jordi, 2008, Monetary Policy, In�ation, and the Business Cycle, chapter2-4.

*Christiano, Lawrence. J., Martin Eichenbaum and Charles L.Evans, 1999,Monetary policy shocks: What have we learned and to what end?, in M. Wood-ford and J. B. Taylor, editors, Handbook of Macroeconomics. Elsevier, Ams-terdam.

Calvo, G. A., 1983, Staggered prices in a utility-maximizing framework, Journalof Monetary Economics, 12, 383�398.

Chari, V., P. J. Kehoe and Elen. R. McGrattan, 2000, Sticky price models ofthe business cycle: Can the contract multiplier solve the persistence problem?,Econometrica 68, 1151�1179

*Clarida, R., Jordi Galí and Mark Gertler, 1999, The science of monetary policy:A New Keynesian perspective, Journal of Economic Literature 37, 1661�1707.

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Fischer, Stanley, 1977, Long-term contracts, rational expectations, and the op-timal money supply rule, Journal of Political Economy 85, 191�205

Goodfriend, M. and Robert. G. King, 1997, The new neoclassical synthesis andthe role of monetary policy, NBER Macroeconomics Annual, pages 231�283.

McCallum, Bennet. T. and Edward Nelson, 1999, An optimizing IS-LM spec-i�cation 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, Journalof Money, Credit, and Banking, 27, 975�984.

Taylor, John. B., 1979, Staggered wage setting in a macro model, AmericanEconomic Review, 69, 108�113

Uhlig, Harald, 1999, A toolkit for analyzing nonlinear dynamic stochastic modelseasily, in R. Marimon and A. Scott, editors, Computational Methods for theStudy of Dynamic Economies. Oxford University Press

Walsh, Carl. E., 2003, Monetary Theory and Policy, The MIT Press, Cam-bridge, Mass, Ch. 5.

Woodford, Michael, 2003, Interest and Prices: Foundations of a Theory of Mon-etary Policy, Princeton University, Ch. 1-3

In�ation Persistence and Sticky Information

Ball, Lawrence, 1994, Credible disin�ation with staggered price-setting, Ameri-can Economic Review 84, 282�289.

*Estrella, A. and J. C. Fuhrer, 2002, Dynamic inconsistencies: Counterfactualimplications of a class of rational-expectations models, American Economic Re-view, 92, 1013�1028.

Fuhrer, J. C. and G. Moore, 1995, In�ation persistence, Quarterly Journal ofEconomics, 110, 127�159.

**Gali, Jordi. and Mark Gertler, 1999, In�ation dynamics: A structural econo-metric analysis, Journal of Monetary Economics, 44, 195�222,

*Gali, Jordi, Mark Gertler and David Lopez-Salido, 2001, European in�ationdynamics, Euoropean Economic Review 45, 1237-1270.

**Mankiw, N. Gregory, 2001, The inexorable and mysterious tradeo¤ betweenin�ation and unemployment, Economic Journal 111, C45�C61

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**Mankiw, N. Gregory. and Ricardo Reis, 2002, Sticky information versus stickyprices: A proposal to replace the New Keynesian Phillips curve, Quarterly Jour-nal of Economics 117, 1295�1328.

*Rudd, Jeremy, and Karl Whelan, 2007, Modeling in�ation dynamics: a criticalreview of recent research, Journal of Money, Credit and Banking, 39 (supple-ment), 155-170.

Solving Rational Expectations Models

*Anderson, G, 1999, The Anderson-Moore Algorithm: A MATLAB Implemen-tation, mimeo, Federal Reserve Board.

Backus, David. K. and John Dri�ll, 1986, The consistency of optimal policy instochastic rational expectations models, discussion paper no. 124, Centre forEconomic Policy Research.

**Blanchard, Olivier. J. and C. M. Kahn, 1980, The solution of linear di¤erencemodels under rational expectations, Econometrica, 48, 1305�1311.

Christiano, Lawrence.J., 2002, Solving Dynamic EquilibriumModels by a Methodof Undetermined Coe¢ cients, Computational Economics 20, Issue 1-2.

Currie, David. and Paul Levine, 1993, Rules, Reputation and MacroeconomicPolicy Coordination, Cambridge University Press.

Dennis, Richard, 2001, Optimal policy in rational-expectations models: Newsolution algorithms, working paper no. 2001-09, Federal Reserve Bank of SanFrancisco.

King, Robert G. and Mark W. Watson, 1998, The Solution of Singular Lin-ear Di¤erence Systems under Rational Expectations, International EconomicReview 39.

** Klein, Paul, 2000, Using the Generalized Schur Form to Solve a Multivari-ate Linear Rational Expectations Model, Journal of Economic Dynamics andControl 24, 1405�1423.

Lindé, Jesper, 2003, The E¤ects of Permanent Technology Shocks on Hours andLabor Productivity in the RBC Model, Sveriges Riksbank Working Paper SeriesNo. 161.

Söderlind, Paul, 1999, Solution and estimation of RE macromodels with optimalpolicy, European Economic Review, 43, 813�823.

Sims, Christopher A., 2000, Solving Linear Rational Expectations Models, www.princeton.edu/~sims/.

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Tervala, Juha, Using the Matlab version of Dynare, mimeo, January 2008.

Numerical Simulation of Dynamic Models

** Gri¤oli, Tommaso Mancini, 2007, Dynare User Guide: An introduction tothe 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 theJoneses, American Economic Review 80, Papers and Proceedings, 38�42.

Amato, Je¤ery D and Thomas Laubach, 2003, Rule-of-Thumb Behaviour andMonetary Policy�, European Economic Review 47, 791-831.

*Amato, Je¤ery D and Thomas Laubach, 2004, Implications of Habit Formationfor 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 E¤ects of a Shock to Monetary Policy,Journal of Political Economy 113, 1�45.

Christiano, Lawrence and Richard Todd, 1996, Time to Plan and AggregateFluctuations, Federal Reserve Bank of Minneapolis Quarterly Review, Vol 20,14-27.

Cooper, Russell and John Haltiwanger, 1993, The Aggregate Implications ofMachine Replacement: Theory and Evidence, American Economic Review 83,360-382.

**Fuhrer, Je¤rey, 2000, Habit Formation in Consumption and its Implicationsfor Monetary Policy Models, American Economic Review 90, 367-390.

Fisher, J., 2006 , The Dynamic E¤ects of Neutral and Investment-Speci�c Tech-nology Shocks, Journal of Political Economy 114, 413-451.

Gourio, Francois and Anil K Kashyap, Investment spikes: New facts and ageneral equilibrium exploration, Journal of Monetary Economics 54, 1�22

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Groth, Charlotta and Hashmat Khan, 2007, Investment Adjustment Costs: Ev-idence from UK and US Industries, Bank of England Working Paper No. 332.

Greenwood, Jeremy, Zvi Hercowitz, and Gregory Hu¤man, 1988, Investment,Capacity Utilization, and the Real Business Cycle, American Economic Review78, 402-17.

*Hayashi, F., 1982, Tobin�s marginal q, and average q: a neoclassical interpre-tation�, 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 themonetary 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 Galí, and Mark Gertler, 1999, The science of monetarypolicy: A New Keynesian perspective, Journal of Economic Literature 37, 1661-1707.

**Söderlind, Paul, 1999, Solution and estimation of RE macromodels with op-timal 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.

Söderberg, J., 2011, Customer Markets and the Welfare E¤ects of MonetaryPolicy, Journal of Monetary Economics, 58, 206-219.

**Walsh, Carl E., 2003, Implications of a changing economic structure for thestrategy of monetary policy, in Monetary Policy and Uncertainty: Adapting toa Changing Economy, Federal Reserve Bank of Kansas City.

Söderström, Ulf, 2002, Monetary policy with uncertain parameters, Scandina-vian Journal of Economics 104, 125-145.

**Cateau, Gino, 2006, Guarding against large policy errors under model uncer-tainty, Working Paper No. 2006-13, Bank of Canada.

Cateau, Gino, 2007, Monetary policy under model and data-parameter uncer-tainty, Journal of Monetary Economics 54, 2083-2101.

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**Giordani, Paolo and Paul Söderlind, 2004, Solution of macromodels withHansen-Sargent robust policies: Some extensions, Journal of Economic Dynam-ics and Control 28, 2367-2397.

Hansen, Lars P. and Thomas J. Sargent, 2007, Robustness, Princeton UniversityPress.

*Leitemo, Kai and Ulf Söderström, 2008, Robust monetary policy in the New-Keynesian framework, Macroeconomic Dynamics 12, 126-135.

Dennis, Richard, Kai Leitemo, and Ulf Söderström, 2009, Methods for robustcontrol, 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 KeynesianModel, Journal of Money, Credit, and Banking 39, Supplement, 35-65.

Blanchard, O. and J. Gali, 2010, Labor Markets and Monetary Policy: A NewKeynesian Model with Unemployment, American Economic Journal - Macro-economics, 2, 1-30.

Ravn, M., and Simonelli, S., 2007, Labor Market Dynamics and the BusinessCycle: Structural Evidence for the United States, Scandinavian journal of Eco-nomics 109, 743-777.

*Christiano, L., Eichenbaum, M., Evans, C., 2005, Nominal Rigidities and theDynamic E¤ects of a Shock to Monetary Policy, Journal of Political Economy113, 1-45.

Christiano, L., Trabandt M. and Walentin, K. 2011, DSGE Models for MonetaryPolicy 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 andStaggered Price and Wage Determination in a Model with Firm-Speci�c Labor,Journal of Economic Dynamics and Control 35, 579�603.

Erceg, C., Henderson, D., Levin, A., 2000. Optimal monetary policy with stag-gered wage and price contracts, Journal of Monetary Economics 46, 281-313.

Gertler, Mark and Trigari, A., 2009, Unemployment Fluctuations with Stag-gered Nash Wage Bargaining, Forthcoming in Journal of Political Economy.

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Merz, M., 1995, Search in the labor market and the real business cycle, Journalof Monetary Economics 36, 269-300

*Gertler, M., Sala, L.and Trigari, A., 2008, An Estimated Monetary DSGEModel with Unemployment and Staggered Nominal Wage Bargaining, Journalof Money, Credit and Banking 40, 1713-1764.

Trigari, A., 2009, Equilibrium Unemployment, Job Flows and In�ation Dynam-ics, Journal of Money, Credit and Banking 41, 1-33.

Akerlof, George, Janet Yellen, 1985, A Near-Rational Model of the BusinessCycle, with Wage and Price Inertia, Quarterly Journal of Economics 100, 823-838.

Altig, D., Lawrence Christiano, Martin Eichenbaum, and Jesper Linde, 2005,Firm-speci�c capital, nominal rigidities and the business cycle, NBER WorkingPaper 11034.

*Ball, Lawrence, and DavidRomer, 1990, Real Rigidities and the Non-Neutralityof Money, Review of Economic Studies 57, 183-203.

*Chari, V.V., P. Kehoe, and Ellen McGrattan, 2000, Sticky Price Models of theBusiness Cycle: Can the Contract Multiplier Solve the Persistence Problem?Econometrica 68, 1151-1179.

**Eriksson, Stefan, and Nils Gottfries, 2005, Ranking of job applicants, on-the-job search , and persistent unemployment, Labour Economics 12, 407-428.

**Gottfries, Nils and Johan Söderberg, 2010, Do Sticky Prices Make Sense?mimeo, Uppsala University.

*Kimball, Miles, 1995, The Quantitative Analytics of the Basic NeomonetaristModel. Journal of Money, Credit and Banking 27, 1241-1277.

Mankiw, Gregory, 1985, Small Menu Costs and Large Business Cycles, Quar-terly Journal of Economics 100, 529-537.

Ravn, Morten O., Stephanie Schmitt-Grohé, and Martin Uribe, 2006, DeepHabits, Review of Economic Studies 73, 195-218.

*Ravn, Morten, and Severino Simonelli, 2007, Labor Market Dynamics and theBusiness Cycle: Structural Evidence for the United States, Scandinavian journalof Economics 109, 743-777.

Taylor. John, 1980, Aggregate Dynamics and Staggered Contracts, Journal ofPolitical Economy 88, 1-23.

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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, chapter7.

*Gali, Jordi, and Tommaso Monacelli, 2005, Monetary policy and exchange ratevolatility in a small open economy, Review of Economic Studies 72, 707-734.

* Schmitt-Grohé, S. and Martin Uribe, 2003, Closing Small Open EconomyModels, Journal of International Economics 61, 163�185.

Adolfson, Malin, Laseén Stefan, Lindé, Jesper and Villani, M, 2005, The Roleof Sticky Prices in an Open Economy DSGE Model: A Bayesian Investigation,Journal of the European Economic Association 3, 444-457.

Adolfson, Malin, Laseén Stefan, Lindé, Jesper and Villani, M, 2007, BayesianEstimation of an Open Economy Model with Imperfect Pass-Through, Journalof International Economics 72, 481-511.

Adolfson, Malin, Laseén Stefan, Lindé, Jesper and Villani, M, 2008, Evaluatingan Estimated New Keynesian Small Open Economy Model, Journal of EconomicDynamics and Control, forthcoming.

Campa, J. M. and Linda S.Goldberg, 2002, Exchange rate pass-through intoimport prices: A macro or micro phenomenon? Working Paper No. 8934,National Bureau of Economic Research.

Corsetti, G. and Paolo Pesenti, 2001, Welfare and macroeconomic interdepen-dence, Quarterly Journal of Economics 116, 421�445.

Devereux, M. B. and C. Engel, 2002, Exchange rate pass-through, exchangerate volatility, and exchange rate disconnect, Journal of Monetary Economics49, 913�940.

Lane, Philip R., 2001, The new open economy macroeconomics: A survey, Jour-nal of International Economics, 54, 235�266.

Leitemo, Kai and Söderström, Ulf, 2002, Simple monetary policy rules andexchange rate uncertainty, manuscript, revised version of Sveriges RiksbankWorking Paper No. 122.

Obstfeld, Maurice and Rogo¤, Kenneth, 2000, New directions for stochasticopen economy models, Journal of International Economics 50, 117�153.

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Obstfeld, M. and Rogo., K., 1995, Exchange rate dynamics redux, Journal ofPolitical Economy 103, 624�660.

Preston, B. and A. Justiniano, Can Structural Small Open Economy ModelsAccount for the In�uence of Foreign Shocks?, working paper, Columbia Univer-sity.

Smets, Frank and R. Wouters, 2002, Openness, imperfect exchange rate pass-through and monetary policy, Journal of Monetary Economics 49, 947�981.

Svensson, Lars E. O., 2000, Open-economy in�ation targeting, Journal of Inter-national Economics 50, 155�184.

Practical Monetary Policy

See homepage of Lars E. O. Svensson:

http://people.su.se/~leosven/und/2012/MonPol2012/Svensson-graduate-lectures-on-practical-monetary-policy-2012.htm

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