Assessing the effects of monetary and fiscal policy using selected macroeconomic models

This monograph addresses the significant discrepancy between the practices of central banks, which have shifted to an inflation targeting regime since the 1990s, and the content of traditional textbooks, which are still predominantly based on the exogenous concept of money supply. This publication rectifies this shortcoming.

The book systematically compares two approaches to money supply – the exogenous (associated with monetary base targeting) and the endogenous (corresponding to inflation targeting). This is followed by an explanation of the IS-LM-BP and aggregate demand and supply macroeconomic models in variations that correspond to both views on money supply. The reader will become familiar with the transmission mechanisms of monetary policy, the role of interest rates and the exchange rate, and the evaluation of the effects of fiscal policy in an open economy. The monograph demonstrates how to use these models to assess the impacts of economic policy measures on real output, inflation, and the exchange rate.

The publication is primarily intended for students of intermediate macroeconomics courses, but it will also be appreciated by teachers, analysts, and professionals. Thanks to its clear structure, summaries at the end of each chapter, and review questions, it is perfectly suited for both in-person and distance learning. The text allows for focusing exclusively on the endogenous concept of money supply – the sections devoted to the exogenous approach are clearly marked and can be skipped. A comprehensive index is also included.

The publication is based on the author's long-standing teaching activities at the Prague University of Economics and Business and his experience teaching at universities abroad. It also reflects current developments in monetary policy in the Czech Republic and around the world.