About the Book: "Monetary Policy" by Jordi Gali is a graduate-level textbook that provides a comprehensive analysis of monetary policy. The book covers the theoretical foundations of monetary policy, the role of central banks, and the effects of monetary policy on the economy.

Future Directions

• Demonstrating the algebra behind key results (e.g., deriving the New Keynesian Phillips Curve from Calvo pricing).
• Showing how to handle expectational difference equations (e.g., solving for inflation and output under a Taylor rule).
• Comparing alternative solution methods (e.g., Blanchard-Kahn vs. Sim’s QZ decomposition).

Problem sets with hints

Understanding these concepts isn't just about passing an exam; it’s about understanding why the Federal Reserve or the ECB makes the decisions they do regarding interest rates. The Challenge of the Problem Sets

• Derivation of the welfare loss function (second-order approximation to household utility).
• Optimal discretionary vs. commitment policy under cost-push shocks.

Code snippets

The textbook and its accompanying exercises center on a single "workhorse" model developed in Chapter 3. This framework departs from classical models by introducing: