Money and Banking

Spring 2023, Fall 2022 and Fall 2021

The course aims to help students understand the role of money, financial markets, financial institutions and monetary policy in the economy, thereby providing a solid foundation for further study or employment in the financial services industry.

Syllabus

 You can find the syllabus here.

Course Learning Objectives

Upon successful completion, students will be able to:

  • Define money and describe its functions. Explain how the money supply is measured and how it is linked to economic growth and inflation.
  • Explain what financial instruments are, how they are used and how they are valued. Describe the role of financial institutions and structure of the financial system.
  • Define and explain how to quantify risk. Explain the role of risk aversion and risk premium. Demonstrate how to reduce risk.
  • Explain how bond prices are determined, why they change and the major types of bond risk. Define the yield curve and interpret it using the expectations hypothesis and liquidity premium theory.
  • Explain how stocks are valued. Assess the risk in holding stocks and describe the stock market's role in the economy.
  • Explain asymmetric information, the problems it causes, and solutions to these problems. Describe how moral hazard and adverse selection are managed by financial intermediaries.
  • Describe a commercial bank's assets and liabilities. Describe the central bank's balance sheets and how monetary policy affects the banking system and the monetary base.
  • Examine and apply how changes to monetary policy affect macroeconomic variables and solve the two basic macroeconomic problems. Identify Federal Reserve policies, goals, and targets. Explain and illustrate how money and interest rates relate to each other.

FAQs

Prerequisites:

  • Introduction to Microeconomics (E201 or B251 or E251).
  • Introduction to Macroeconomics (E202 or B252 or E252).

Required textbook and resources:

  • Cecchetti, S. and Schoenholtz, K. (2021), ‘Money, Banking and Financial Markets’, 6th Ed., McGraw-Hill/Irwin.
  • Class Canvas Website.
  • TopHat.
  • Microsoft Excel or any other data programming language.