This undergraduate survey course, taught by a retired Federal Reserve economist, will introduce you to the challenges of central banking during the extended period of slow recovery, low inflation, and now, finally renewed growth and moderate inflation, that have followed the financial crisis and the “Great Recession(s).” The primary emphasis of the course will be on the importance of monetary policy to the health of the economy. Central banks are playing a critical role in 2020 in supporting their financial systems and economies against the severe adverse impacts caused by the global coronavirus pandemic.

We will examine both conventional and unconventional monetary policy tools (typically interest rates) used by central banks and how their use developed following the financial crisis. Content on emerging policies on monetary policy “normalization” will also be analyzed. We will discuss the roles of central bank independence, decision making, and transparency in the process of making monetary policy.

We will focus on the key roles of the Federal Reserve System (FED) and the European Central Bank (ECB) in their respective economies, with special emphasis on their actions during and following the 2007-2009 financial crisis, the serious recession(s) that followed, the long and moderate economic recovery. Looking forward, we will examine how central banks will or plan to normalize monetary policy as their economies expand and inflation approaches (or is expected to approach) their 2 percent inflation goals, and finally, what actions they are taking in 2020 to boost their respective economies to counteract the global pandemic.

We will examine the Fed and ECB’s policy decisions over the past year and in the year ahead in the context of current economic conditions, monetary policy normalization, and shocks (like the Brexit vote, actual Brexit, trade wars) and discuss the potential impacts of those policies on their respective economies and the global economy. In addition, we will discuss key challenges and actions by central banks facing a global pandemic causing a financial & economic crisis, & recessions.

Students should develop a solid understanding of the important roles central banks play in major economies in normal times and how central bank policies have played an even more critical role in the health of their economies during and after the 2007-2009 financial crisis. Students should know the key functions of many major central banks; monetary policy, lender of last resort, bank supervision and regulation, systemic risk regulator, and understand their role in the payments system. Many of these tools and programs are now being employed in response to the global pandemic.

Students will know what central banks can do and cannot do, using their conventional and unconventional monetary policy actions, to support the economy and the central bank’s monetary policy goals. Moreover, students will understand which central bank policies are designed to stimulate the economy and which will slow it down, and why that is important. “Normalization” policies designed to return interest rates and central bank balance sheets to more normal levels also will be analyzed.

Students who complete the course will understand how monetary policy tools can affect the financial markets, leading to impacts on the real economy, and its key sectors, including consumers, business, government, and foreign trade.

Finally, students will learn to evaluate the ECB and US economies by analyzing in real time, key current actual economic and financial indicators and forecasts.  Students will use that information (much as central bank decision makers use it…) to participate in a “virtual" class recommendation on May 2020 monetary policy decisions by both the FED and ECB. Participation here will be count towards your class participation grade.

THIS WILL BE A DISTANCE LEARNING COURSE.

There will not be an assigned text for the course, rather a list of online reading and video materials is provided in the paragraphs below. The course will employ a number of learning strategies, including lectures, class discussions, external readings, and Federal Reserve Chair Ben Bernanke’s May 2012 video presentations on central banking and monetary policy to students at George Washington University. In addition, students will be expected to read, discuss, and interpret monetary policy testimony, speeches, and decisions by leading central bank officials.

FINAL EXAM: (50 % of course grade):
Students will be required to complete a comprehensive take-home-final examination that will be distributed after the completion of lectures. It will be distributed around the end of May, and will be due about a week later. It will be comprehensive and cover materials from the lectures, readings, videos, other course content and in-class discussions. The WU uses plagiarism software to discourage copying!

CLASS PAPER (40 % of course grade):
(Length of 750-to-1,000 words.) Due as PDF File by EMAIL on Sunday, 14 June 2020.

CLASS PARTICIPATION: (10 % of course grade)
The remaining 10% of the course grade will be class participation. Participation in the DISTANCE LEARNING COURSE will be monitored by participation on WULearn CHAT & WULearn FORUMS. Your questions and comments are important! I will track participation during the course from your CHAT & FORUM activity & your “votes” of a May 2020 Fed & ECB Policy Decision.

For incoming exchange students (who were nominated and sent by one of WU´s partner universities) only!

Minimum requirement is an introductory course in economics that includes macroeconomic content. Coursework in intermediate macroeconomics or money and banking, and basic finance, or both would be preferred.

Minimum requirement is an introductory course in economics that includes macroeconomic content. Coursework in intermediate macroeconomics or money and banking, and basic finance, or both would be preferred.

PLEASE ALWAYS USE BOTH EMAIL ADDRESSES TO CONTACT Mr. Zimmerman:

Gary.C.Zimmerman.WU@gmail.com

gzimmer@wu.ac.at

OFFICE HOURS:  THERE WILL BE NO OFFICE HOURS, since this is now a DISTANCE LEARNING COURSE. Mr. Zimmerman will be available through the WULearn CHAT and FORUM facilities, as well as by emails. Use of the CHAT & FORUM facilities are very helpful for questions about course content, since they will be available to all class members.

For ADMINISTRATIVE MATTERS please contact Program Managers, International Office: Christina Plieschounig @ (christina.plieschounig@wu.ac.at).

Approximate Distance Learning LECTURE SCHEDULE Dates
Week 1: Monday, April 27: Lec. 1, 2, 3, & 4
Week 2: Monday, May 4: Lec. 5A, 5B, 6, & 7
Week 3: Monday, May 11: Lec. 8, 9A, 9B, & 11
Week 4: Monday, May 18: Lec. 10, 12, 13, & 14
Week 5: Monday, May 25: Lec. 15, 18, 16A, & 16B

Final Exam: Take Home, Due on Sunday, June 7
Short Paper: Due on Sunday, June 14

For the READINGS, please see the content described below and posted on WU Learn website.

Students will want to access a number of official websites for publications, articles, documents, speeches, testimony, and data, from the Federal Reserve System, the European Central Bank, the Bank of Japan, Bank of England, other central banks and official institutions. The reading list will be updated depending on current economic and monetary policy developments in the major world economies.

COURSE READINGS  --  First Priority – Background on Central Banking

NOTE:   Websites and LINKS may occasionally change or be updated.  You may search for them or check with me…

Please read BEFORE first class:

1. Bordo, Michael D. (2007) “A Brief History of Central Banks.”  Economic Commentary, Federal Reserve Bank of Cleveland. Dec. 1, 2007. A seven-page history of central banking.

Note, this was written before the financial crisis. No longer on the website, this will be posted for you on WU Learn and/or sent by email.   

2. Purposes & Functions (website & book) (2016), Federal Reserve Board of Governors. Background on the Fed.   (New revised version, post-financial crisis.) https://www.federalreserve.gov/aboutthefed/pf.htm

READ the Following:

 Chapter 1. Overview of the Federal Reserve System.  Pages 2-7.

 Chapter 2. The Three System Entities.  Pages 8-19.

 Chapter 3. Conducting Monetary Policy.  Pages 20-53.

SKIM the Following:

Chapter 4. Promoting Financial System Stability.   Pages 54-68.

3. The European Central Bank: History, Role, and Functions (website & book) (2004), European Central Bank.  NOTE: Background on the ECB, written before the financial crisis. http://www.ecb.int/pub/pdf/other/ecbhistoryrolefunctions2006en.pdf

Read the Following:

o Chapter 1, EMU, the ECB and the euro. Pages 15-30.

o Chapter 2, Central Banking in the EMU. Pages 41, 45-51.

o Chapter 3, ECB policies and Eurosystem activities. Pages 77-102.

Skim the Following:

o Chapter 4, The ECB and the European Community. Pages 121-127.

o Chapter 5, The ECB’s involvement in international cooperation. Pages 141-149.

o See also: Glossary, pages 203-216 for definitions and explanations.

4. SKIM WEBSITES of central banks below and your home country (Google or links below):

o a. Federal Reserve Board of Governors - www.federalreserve.gov

o b. European Central Bank - www.ecb.int/home/html/index.en.html

o c. Bank of England - www.bankofengland.co.uk/pages/home.aspx

o d. Bank of Japan - www.boj.or.jp/en/about/index.htm

o e. Your home country CB - Link  ________________

5. READINGS on CURRENT NEWS about central banking: ONCE YOU READ OR RECEIVE THIS OUTLINE, PLEASE START READING & MONITORING THE ECONOMIC and FINANCIAL NEWS:

These articles will give us a flavor for current developments in the world of central banking! You need to know what is happening when you make simulated monetary policy decisions for the FED & ECB!

This is especially true today in 2020, as the FED, ECB, & other central banks are making critical policy decisions for the future health of their economies, reacting to the economic downturns caused by the global pandemic, and working to shorten likely 2020 recessions, as well as the prospects for a faster and stronger economic recovery.

A. FOLLOW MEDIA: Follow the major media, newspapers, & financial press (i.e., Financial Times, NY Times, The Economist, Wall Street Journal, Bloomberg, Reuters, BBC, Washington Post…) for monetary policy discussions and decisions by the major central banks.

Articles typically will cover such topics as: How do these central banks evaluate their economy? What risks are they concerned about? What issues are the policy makers debating? What policy changes are being proposed and/or implemented in 2020, or projected for 2021, before the global pandemic? What will GDPr growth rates do in 2020? How fast are current inflation and expected inflation rates and how are they changing?  How are global economic and financial conditions? How is financial market volatility? How have the FED and the ECB changed or re-started their QE bond buying programs in 2020? What policies will these central banks employ to offset a 2020 recession and promote a 2021 economic recovery!

B. CURRENT ARTICLES (EMAILS &/or POSTED on WU LEARN):

I’m now planning on sending you 2-or-3 links to articles or news reports & short news videos that focus on the wild changes in the global financial system in the recent past. Earlier, I was planning on sending them every couple weeks, but that has changed with the move to distance learning and the global financial roller coaster and economic disruptions facing the global economy. These articles will cover recent economic and monetary policy developments that we will be discussing and examining in class. The first one should arrive around the end of March.

PLEASE READ THEM AS THEY ARE MADE AVAILABLE (DON’T WAIT UNTIL MAY!) by Email and Posted on the Learn@WU course website.      
--> IF YOU DO NOT RECEIVE THEM, or find them on Learn@WU, please email me!   

6. VIDEO CONTENT – These videos will be reviewed and discussed during class or assigned as homework.

· Bernanke, Ben (2012) The Federal Reserve and the Financial Crisis –  Fed Chairman Bernanke’s 2012 College Lecture Series @ George Washington University School of Business. Information and video: http://www.federalreserve.gov/newsevents/lectures/about.htm We will view and discuss most of these four Bernanke lectures in class or as homework assignments.

· Draghi, Mario. President of the European Central Bank (2012) “Interview with the Financial Times.” Looks at the ‘euro’ rescue and forces that the ECB faced in 2012 (or more recent updates).
BACKGROUND ONLY: No longer on the ECB website, but can be found on the Financial Times website.

VIDEOS of MONETARY POLICY PRESS CONFERENCES following Policy Meetings. We will listen to what the heads of the ECB and Fed are saying and discussing in the post-meeting press conferences. I would recommend viewing one before the class starts meeting.  Below are the links to the video press conferences. They last about an hour, or if you prefer, just read the transcripts...

· Powell, Jerome. Chair of the Board of Governors of the Federal Reserve System (2018 to present).  VIEW a Press Conference. Click on the most recent 2020 press conference… (video or transcript)

https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

· Legarde, Christine, President of the ECB (2019). VIEW most recent 2020 Press Conference. 

https://www.ecb.europa.eu/press/calendars/mgcgc/html/index.en.html

7. MONETARY POLICY TRANSPARENCY – LINKS TO FED and ECB monetary policy information that we will regularly access and discuss in class:

· Federal Reserve System: Monetary Policy Decisions and Information Link to FOMC Statements & Minutes. Chairman’s Press Conference. Longer-Run Goals and Policy Strategy. Credit and Liquidity Programs. www.federalreserve.gov/monetarypolicy/default.htm

· European Central Bank: Information and Key Events Link to information on objectives, policy instruments, speeches, testimonies, press conferences. www.ecb.int/mopo/html/index.en.html

BACKGROUND INFORMATION – Financial Crisis, Monetary Policy and the slow recovery articles and speeches –

Suggest interested students may wish to visit these websites & at least skim some of these articles before the first class session:

Federal Reserve Board Monetary Policy and Financial Crisis Programs website:
https://www.federalreserve.gov/monetarypolicy.htm

Federal Reserve Bank of St. Louis website:  "FRED DATA & CHARTS!" (Mine come from here...) Also, The Financial Crisis (Timeline of Events)          https://www.stlouisfed.org/

Bernanke, Ben. 2011. “The Effects of the Great Recession on Central Bank Doctrine and Practice.” Speech at FRB Boston Conference, Oct. 18. https://www.federalreserve.gov/newsevents/speech/bernanke20111018a.htm

Duke, Elizabeth. 2010. “Come with Me to the FOMC.” Speech to the Money Marketers of New York University. Oct. 19, 2012. A policymaker’s view. https://www.federalreserve.gov/newsevents/speech/duke20101019a.htm

BACKGROUND -- Economic Letters (More background articles (in chronological order) for interested readers.  These are short articles of specific topics from the Federal Reserve Bank of San Francisco.

https://www.frbsf.org/economic-research/publications/economic-letter/?utm_source=frbsf-home-economic-letter-more&utm_medium=frbsf&utm_campaign=economic-letter

· Yellen, Janet. (2008) The Mortgage Meltdown, Financial Markets, and the Economy, #35-36, Nov. 7.

· Rudebusch, Glenn. (2009) The Fed’s Monetary Policy Response to the Current Crisis, # 17, May 22.

· Chung, Laforte, Reifschneider & Williams (2011) Estimating the Macroeconomic Effects of the Fed’s Asset Purchases, #03, Jan. 31.

· Nechio F. (2011) Long-Run Impact of the Crisis in Europe: Reforms and Austerity Measures, #07,3/7.

· Williams, J. (2011) Unconventional Monetary Policy: Lessons from the Past Three Years, #31, Oct. 3.