Workshop on Central Banking for Small Open Economies

Central Bank of the Bahamas
January 18-22, 2021


Monday, January 18

Lecture 1: Keynote Lecture, Monetary Policy Introduction

Manuel Ramos-Francia, General Manager, CEMLA


Lecture 2: Overview of Central Banking

Santiago García-Verdú

a. Central Banking: an abridged history and an overview

  • Money
  • An abridged history of central banking
  • Historic hyperinflation episodes
  • Inflation and measures of welfare  
  • Key inflation statistics 
  • Recent historical inflation

b. Roles, Functions, and Mandates of Central Banks

  • Central banks’ objectives
  • Policy instruments and objectives
  • Nominal anchors
  • Pre-Crisis Central Banking (Introduction)
  • Post-Crisis Central Banking (Introduction).

c. The IMS. “The Rules of the Game.”

  • The evolution of the IMS, the Gold Standard, Bretton Woods, post-Bretton Woods, and the IMF.    
  • From the OHIO principle to coordination/cooperation.
  • Risk-sharing, incomplete markets, Global Safety Net and International Reserve accumulation.


Tuesday, January 19

Lecture 3: Price Stability and Monetary Policy I

Santiago García-Verdú

a. Foundations  

  • Modern roles and functions of central banks: money issuance, monetary policy, payments systems, LOLR, and supervision.
  • Price stability (Introduction)
  • Financial stability (Introduction)
  • Price stability and financial stability nexus.
  • Key concepts
  • Selected money demand models.
  • Selected pricing models.
  • Stylized facts about prices (US)  


Lecture 4: Price Stability and Monetary Policy II

Santiago García-Verdú

a. Monetary Policy in a closed economy

  • Inflation and the Fisher Equation
  • New Keynesian Model of Inflation.
  • IT in a New Keynesian Model

b. Monetary Policy in an open economy

  • NER; RER; Effective vs. Bilateral; and LOOP.
  • UIP and CIP. 
  • IT in a New Keynesian Model (open economy)

c. Criticisms to DSGEs Models

  • No financial sector
  • Complete markets assumption
  • Linearized model


Wednesday, January 20

Lecture 5: Financial Stability, Introduction

Santiago García-Verdú

a. Traditional Issues  

  • Limited Liability 
  • Moral Hazard
  • Leverage
  • Executive compensation
  • Rating agencies

b. Traditional Models  

  • Financial Accelerator   
  • Bank Runs
  • The market for lemons
  • Adverse selection

c. Other issues

  • Potential runs in different markets
  • Price system functioning under severe financial stress and too systemic to fail.    


Lecture 6 : Macroprudential Policy

Serafín Martínez-Jaramillo

a. Initial considerations

  • Capital (revision, quality, risk weights, and CCB)   
  • Liquidity (LCR and NSFR)   
  • Financial Market Infrastructures (CCP and Trade Repositories)
  • Large Exposures Framework

b. Further considerations

  • Legal Entity Identifier 
  • Transmission Channels
  • Resolution Mechanisms (Living wills)
  • Executive compensation
  • Rating agencies
  • Other


Thursday, January 21

Lecture 7: Systemic Risk and Stress Testing

Serafín Martínez-Jaramillo

a. Stress Testing

b. Measurement

  • CoVaR
  • Systemic Shortfall
  • Data Gaps

c. Interconnectedness


Lecture 8: Financial Market Infrastructures

Serafín Martínez-Jaramillo

a. Principles for Financial Market Infrastructures


Lecture 8’: Fintech Overview

Serafín Martínez-Jaramillo

a. Blockchain




Friday 22, January 22

Lecture 9: Post-GFC central banking challenges

Santiago García-Verdú

a. Secular Stagnation

b. Monetary Policy and Term Structure of Interest Rate   


Lecture 10: Post-GFC central banking challenges

Santiago García-Verdú

a. UMPs

b. Capital Flows

c. Capital Flows Management

d. Microstructure