Home Page of Carl E. Walsh

Professor Carl Walsh
Department of Economics
University of California, Santa Cruz
Santa Cruz, CA 95064

Office Hours: by appointment
Office: 467 Engineering 2
Phone: (831) 459-4082
email: walshc@ucsc.edu
fax: 831-459-5077

Research Interests: Monetary policy, central banking: My research deals primarily with central banking and issues associated with the theory of monetary policy. Recent work has focused on the role of transparency and monetary policy announcements, the role of the cost channel in the transmission of monetary policy, and the integration of modern theories of unemployment into frameworks for monetary policy analysis.

My vita contains a complete list of my publications.

Selected recent publications
Working papers
Downloadable selected publications
Books

The 4th edition of Principles of Economics by Joe Stiglitz and Carl Walsh is now available in micro and macro splits as well as in a single volume.
The second edition of Monetary Theory and Policy is available. See link to Books.



Recent working papers and forthcoming publications: To view downloadable pdf versions, click on the titles.
Transparency, the Opacity Bias, and Optimal Flexible Inflation Targeting, February 2008. This is a revised version of a paper previously titled "The Role of Transparency as a Mechanism for Accountability" and presented at the ASSA Meetings, January 2008.
Communications and the Objectives of Monetary Policy. Talk delivered at the Second Summit Meeting of Central Banks on Inflation Targeting, hosted by the Banco Central de Chile, Santiago, Chile, Nov. 14, 2007.
Monetary Policy and Key Unobservables in the G-3 and Selected Inflation-Targeting Countries, with Klaus Schmidt-Hebbel. Prepared for the Eleventh Annual Conference of the Banco Central de Chile, Nov. 15-16, 2007.
Inflation Targeting and the Role of Real Objective. Sept. 2007. This is the current version of a talk I have given at the Central Bank of Uruguay, conferences at Glasgow Univeristy and Cambridge University, and the Czech Economic Society and CERGE-EI.
Announcements and the Role of Policy Guidance, prepared for the 32nd Annual Economic Policy Conference, Federal Reserve Bank of St. Louis, October 19-20, 2007, Dec. 18th version.
Central bank independence, prepared for the New Palgrave Dictionary, December 2005.
Parameter misspecification and robust monetary policy rules. ECB Working Paper No. 477, April 2005.
Remarks prepared for the Seminar on Selected Experiences in Implementing the Code of Good Practices on Transparency in Monetary and Financial Policies, Monetary and Financial Systems Department, International Monetary Fund, Washington, D.C., Feb. 7, 2005.
Comments on "Conducting Monetary Policy at Very Low Short-Term Interest Rates," by Ben S. Bernanke and Vincent R. Reinhart, AEA Session, January 3, 2004.
Modern Central Banking: An Academic's Perspective, prepared for the 10th Anniversary of the introduction of the dram, Central Bank of Armenia, Nov. 23, 2003.
Monetary Policy Trade-offs in the Open Economy, Nov. 1999.
Selected publications:
Vacancies, Unemployment, and the Phillips Curve, (with Federico Ravenna), Newly revised, May 2008, forthcoming, European Economic Review.
Optimal economic transparency, The International Journal of Central Banking, 3(1), March 2007, 5-36.
The contribution of theory to practice in monetary policy: recent developments, Monetary Policy: A Journey from Theory to Practice: An ECB Colloquium held in honour of Prof. Otmar Issing, Frankfurt, 16-17 March 2006, 143-160.
Transparency, flexibility, and inflation targeting, Prepared for the Ninth Annual Conference of the Central Bank of Chile, F. Mishkin and K. Schmidt-Hebbel (eds), "Monetary Policy under Inflation Targeting," Santiago, Chile, 2007, 227-263.
Optimal Monetary Policy with the Cost Channel, (with Federico Ravenna), Journal of Monetary Economics, 53 (2006), 199-216. (earlier versions titled The Cost Channel in a New Keynesian Model: Evidence and Implications), Technical Appendix.
Comment's on Levin, Onatski, Williams, and Williams, NBER Macroeconomic Annual 2005, M. Gertler and K. Rogoff (eds.), The MIT Press, 2XX-308.
Economic Structure and Monetary Policy Design, in Macroeconomic Implications of Postcrisis Structural Change, Lee-Jay Cho, Dongchul Cho, and Yoon Hyung Kim (eds.), Korean Development Institute, May 2005, 189-225.
Endogenous Objectives and the evaluation of targeting rules for monetary policy, formerly titled Parameter misspecification with optimal targeting rules and endogenous objectives. Prepared for the Nov 19-20, 2004 Carnegie-Rochester Conference, Journal of Monetary Economics, 52 (2005), 889-911.
Labor Market Search, Sticky Prices, and Interest Rate Policies, Review of Economic Dynamics 8(2005), 829-849.
Robustly Optimal Instrument Rules and Robust Control: An Equivalence Result, Journal of Money, Credit, and Banking 36(6), Dec. 2004, 1105-1113. Some extensions and generalizations are discussed in The equivalence of robustly optimal targeting rules and robust control targeting rules: an extension (May 2004).
Interest and Prices: A Review Essay, a review of Mike Woodford's Interest and Prices: Foundations of a Theory of Monetary Policy, Macroeconomic Dynamics 9(2005), 462-468.
Implications of a changing economic structure for the strategy of monetary policy, in Monetary Policy and Uncertainty: Adapting to a Changing Economy, Jackson Hole Symposium, Federal Reserve Bank of Kansas City, 2003, 297-348.
Labor Market Search and Monetary Shocks, Aug. 2002. in Elements of Dynamic Macroeconomic Analysis, S. Altug, J. Chadha, and C. Nolan, editors, Cambridge University Press, 2003, 451-486. JEL: E52, E58 Appendix to Labor Market Search and Monetary Shocks.
Comment on: The zero-interest-rate bound and the role of the exchange rate for monetary policy in Japan by G. Coenen and V. Wieland, Carnegie-Rochester Conference Series, Journal of Monetary Economics, 50 (5), July 2003, 1103-1108. (also available online) .
Speed Limit Policies: The Output Gap and Optimal Monetary Policy. (a shorter version that now includes a comparison with price level targeting: July 2002, a shorter version appeared in the American Economic Review, 93(1), March 2003, 265-278.) Older version that contains the appendix and more complete derivations (rev. July 2002)
Accountability, Transparency, and Inflation Targeting Journal of Money, Credit, and Banking, 35(5), October 2003, pp. 829-849.)
Teaching Inflation Targeting: An Analysis for Intermediate Macro. Journal of Economic Education 33 (4), Fall 2002, 333-347.
When Should Central Bankers Be Fired? Economics of Governance 3 (1), 2002, 1-21.
Market Discipline and Monetary Policy, Oxford Economic Papers, 52 (2000), 249-271. Reply to de Carvelho and Bugarin, Oxford Economic Papers 57 (2005), 740-741.
Announcements, Inflation Targeting and Central Bank Incentives, Economica, 66 (1999), 255-269.
Central Bank Independence, Economic Behavior and Optimal Term Lengths (with Christopher J. Waller), American Economic Review, 86 (5), Dec. 1996, 1139-1153.
Is New Zealand's Reserve Bank Act of 1989 an Optimal Central Bank Contract?, Journal of Money, Credit and Banking, 27 (4), Nov. 1995, Part 1, 1179-1191.
Optimal Contracts for Central Bankers, American Economic Review, 85 (1), March 1995, 150-167.
Books

Monetary Theory and Policy, 2nd. ed., The MIT Press, 2003.
The second edition of this graduate level text on monetary theory and policy is now available from MIT Press. Check out the MIT Press site to request an examination copy. This book presents an advanced treatment of the major topics of monetary economics. It is designed for use in a graduate course in monetary economics, but it can also be used in graduate macro courses and the chapters on monetary policy topics should be accessible to advanced undergraduates.

This second edition includes new discussions of empirical evidence on the interest elasticity of money demand, the fiscal theory of the price level, the new Keynesian model, optimal policies in forward-looking models, stability and the Taylor principle, and open economy new Keynesian models. It also expands its coverage of multiple equilibria, the role of timing assumptions in cash-in-advance models, and the Ramsey approach to optimal monetary taxation. A new chapter treats policy analysis in new Keynesisan models; the discussion includes the derivation of the policy objective function, optimal commitment and discretionary outcome, targeting rules,and instrument rules.

The programs, and solutions to the problems in the second edition book are available to instructors. Solutions can be optained by contacting MIT Press or they can be requested directly by emailing me. Comments can be sent to me at walshc@ucsc.edu.
UPDATED: Known typos in the second edition (as of May 9, 2005).
UPDATED: Detailed derivation of corrections to sections 6.5.1 and 2.

Economics, with Joe Stiglitz, W. W. Norton, 2006, 4th ed. (Also available in separate micro and macro splits.) A modern treatment of economics for the introductory student. Exposes students to the basic competitive model, but deals also with the important role of imperfect information and imperfect competition. The macro approach replaces static aggregate demand and supply models of the price level, to which a Phillips curve is then appended, with an integrated framework for understanding inflation and output determination.
Economic 205B, Advanced Macro Theory, Winter 2008 | Economic 2, Principles of Macro | UCSC Economics Department Home Page
Carl E. Walsh / UCSC / walshc@ucsc.edu