Syllabus Money and Banking

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introduce students to monetary and financial institutions. We will study how ... F. Mishkin, The Economics of Money, Banking and Financial Markets, ninth edition  ...
Syllabus Money and Banking Wen-Chieh Lee Phone: 02-2939-3091 ext.51548 Email: [email protected] Office Hour: Friday, 2-4 PM

Office: 51548 Fax: 02-2939-0344

Course Description: This is a one year course on Money, Banking and Financial Markets. The course will introduce students to monetary and financial institutions. We will study how monetary policy influences interest rates and asset markets, such as the bond market and the stock market. We will analyze the effect of asymmetric information in corporate finance, the design of financial contracts. We will analyze financial intermediation and the role of banks in the economic system and study the economic rationale behind banking regulation. Finally, we will discuss monetary policy. Specifically, we will review evidence and theory on how monetary policy affects real economic activity, and then study the instruments and goals of monetary policy, focusing in particular on credibility and expectations management for central banks, and the connection with fiscal policy.

Learning Outcomes: After completing this course, you should be confident in your ability to explain: 1. The focus on the determination of financial prices and interest rates, 2. The role and function of the banking system, 3. International issues that relate to both the role and function of the banking system

Course Requirements: The grading will be based on 3 homework assignments and 2 exams. The exams will occur throughout the course and in the finals week. The dates are to be determined and will be updated throughout. Exam

Grade

Midterm

30%

Final

40%

Assignments

20%

In-class Discussion

10%

Readings : TEXTS:

F. Mishkin, The Economics of Money, Banking and Financial Markets, ninth edition, Pearson, 2010.

Topics : 1st semester Part I. Financial markets Topics: Interest rates, term structure, basics of stock valuation, equity premium. wk. 1-7, Midterm Part II. Financial contracts Topics: Asymmetric information and conflict of interest in financial contracting. Loans and equity financing. Managerial compensation. Financial intermediation and banking Management of financial intermediaries (conflicts of interest, moral hazard and adverse selection). Gatekeepers in financial markets (rating agencies, SEC, regulation). wk 9-16, Final 2nd semester Part III. Monetary transmission: a. Creation of money (role of fed and banks, links with interest rate determination) wk. 1-3 b. Impact of monetary policy on real variables: theory and evidence. wk. 4-5 Part IV. Conduct of monetary policy: a. Institutional procedures and tools, the Taylor rule b. Issues: Time inconsistency and institutional design, connections with fiscal policy. wk. 6-7 Midterm Part V. Inflation and Rational Expectations; wk. 8-12 Part VI. Financial Markets, Financial Institutions and Financial Crises. Wk. 13-16

Final