Graduate Course Macroeconomics
Real-Financial Interactions
Elmer Sterken
University of Groningen
The Netherlands
Aims: This course gives the foundations of monetary theory and the implications for realfinancial interactions. How do the financial and real sectors interact, looking from the
perspective of the economics of information in banking.
Prerequisites: Students need to have knowledge of microeconomics, macroeconomics,
and preferably financial economics.
1. Money in the Utility Function
This lecture provides the basics of monetary theory in equilibrium
Walsh, C.E., Monetary Theory and Policy, 2nf edition, MIT Press, Chapter 2.
2. Money in Transactions
This lecture presents the transactions approach of money.
Walsh, C.E., Monetary Theory and Policy, 2nd edition, MIT Press, Chapter 3.
3. Models of Financial Intermediation
Freixas, X. and J-C. Rochet, Microeconomics of Banking, 2nd edition, Chapter 2.
4. The credit channel of monetary policy
Bernanke, B.S. and A.S. Blinder, 1988, Credit, money, and aggregate demand, American
Economic Review (Papers and Proceedings), 78, 435-439.
Bernanke, B.S. and M. Gertler, 1995, Inside the black box: the credit channel of
monetary policy transmission, Journal of Economic Perspectives, 9, 27-48.
Freixas, X. and J-C. Rochet, 1997, Microeconomics of Banking, MIT Press.
Tobin, J.,1969, A general equilibrium approach to monetary theory, Journal of Money,
Credit, and Banking, 1, 15-29.
5. General equilibrium models: the role of net worth
Bernanke, B.S. and M. Gertler, 1989, Agency costs, net worth, and business cycle
fluctuations, American Economic Review, 79, 14-31.
Kiyotaki, N. and J. Moore, 1997, Credit cycles, Journal of Political Economy, 105, 211248.
6. New-Keynesian models: credit frictions
Bernanke, B.S. and M. Gertler, Financial fragility and economic performance, Quarterly
Journal of Economics, 105, 87-114.
Bernanke, B.S., M. Gertler, and S. Gilchrist, 1999, The Financial Accelerator in a
Quantitative Business Cycle Framework, in J.B. Taylor and M. Woodford, eds.,
Handbook of Macroeconomics. Amsterdam: North-Holland, chapter 21, 1341-1393.
Blanchard, O.J. and N. Kiyotaki, 1987, Monopolistic competition and the effects of
aggregate demand, American Economic Review, 77, 647-666.
7. Banking and monetary transmission
Kashyap, A.K. and J. Stein, 1995, The impact of monetary policy on bank balance sheet,
Carnegie-Rochester Conference Series on Public Policy, 42, 151-195.
Stein, J.C., 1998, An adverse selection model of bank asset and liability management
with implications for the transmission of monetary policy, RAND journal of economics,
29, 466-486.
Van den Heuvel, S., 2002, The bank capital channel of monetary policy, Wharton
Business School, Mimeo.
8. Empirics of the credit view: the bank lending channel
Kashyap, A.K. and J.C. Stein, 2000, What do a million of observations on banks balance
sheets say about the transmission of monetary policy?, American Economic Review, 90,
407-428.
Kashyap, A.K., J.C. Stein and D.W. Wilcox, 1993, Monetary policy and credit
conditions: Evidence from the composition of external finance, The American Economic
Review, 83, 78-98.
Oliner, S.D. and G.D. Rudebusch, 1996a, Is there a broad channel for monetary policy?,
Federal Reserve Bank of San Francisco Economic Review, 1, 4 - 13.
Van den Heuvel, S., 2001, Banking conditions and the effects of monetary policy:
evidence from US states, Wharton Business School, Mimeo.
9. Banking and growth
Bencivenga, V.R. and B.D. Smith, 1991, Financial intermediation and endogenous
growth, Review of Economic Studies, 58, 195-209.
Levine, R., N. Loayza and T. Beck, 2000, Financial intermediation: causality and growth,
Journal of Monetary Economics, 46,31-77.
Beck, T. and R. Levine, 2004, Stock markets, banks and growth: panel evidence, Journal
of Banking and Finance, 28, 423-442.