course outline for ―introduction to money and banking ... syllabi.pdf · economy will be...

1

Course Outline for ―Introduction to Money and Banking‖ (ECON

0280)—Spring 2012

Course Code and Title:

ECON 0280 Introduction to Money and Banking

Lecturer:

Dr James R. Maloy

Office: Posvar 4705

Phone: 412 648 7117

E-mail: [email protected]

Office Hours: Tuesday/Thursday 1:00-2:00; Thursday 9:30-10:30; other times by

appointment.

Course Aims and Overview:

ECON 0280 is a course on the economics of money, banking and financial markets. The

course aims to provide the student with an introduction to the role of money, financial

markets, financial institutions and monetary policy in the economy, thus providing a solid

foundation for further study or employment in the financial services industry.

There are three main components of the course. First, the role of financial markets in the

economy will be considered with a particular emphasis on bond markets and interest rate

determination. The course will then cover the main aspects of banks and other financial

institutions before turning to an investigation of the role of money, central banking and

monetary policy.

Course Delivery:

The course will be taught through two weekly lectures. Lectures will be used for

lecturing as well as a seminar-type discussion of problem sets. Specific readings for each

class are specified below. The lecturer will be available for consultation during

advertised office hours or by appointment.

Assessment:

The course will be assessed by quizzes/assignments, a mid-term examination, a non-

cumulative final examination.

Six in-class quizzes or out-of-class assignments; the average score of the best

five of the six will constitute 30% of the final grade.

A mid-term examination on Topics 1 – 6 will constitute 35% of the final grade.

This exam will be held during lecture on Thursday 23rd February.

2

A final examination on Topics 7 – 13 will constitute 35% of the final grade. It

will be held on during finals week at a time to be announced.

Problem sets will be distributed for each topic and will be discussed in class the

following week. These are not assessed but are a fundamental part of the course.

You are expected to attempt these assignments before coming to class.

You are expected to complete assignments and take examinations on the dates specified.

Late submissions of work or re-sits of examinations are only acceptable in extreme

circumstances, such as serious illness/injury/death in immediate family/jury duty. A

health certificate from a doctor or other evidence will be required. If for any such reason

you cannot meet a deadline you must IMMEDIATELY inform me (by email if possible)

BEFORE the deadline to arrange make-up work. It is your responsibility to keep me

informed of any problems you are having in meeting deadlines.

Note: All work submitted for this course must be your own. Any evidence of cheating

and/or plagiarism in any assignment will be dealt with as specified by the Academic

Integrity Policy, as discussed in the University’s Undergraduate Bulletin.

The Office of Disability Resources and Services (216 William Pitt Union, 412-624-7890)

is available for students who have requested or may request accommodation for a

disability. If needed please contact the office as early as possible in the term.

Grading Scale:

All grades will be given as percentages out of 100. Final average grades will be

calculated by weighting each score according to the weights indicated above and will be

rounded to the nearest integer.

92 – 100: A

90 – 91: A-

88 – 89: B+

82 – 87: B

80 – 81: B-

78 – 79: C+

72 – 77: C

70 – 71: C-

68 – 69: D+

62 – 67: D

60 – 61: D-

0 – 59: F

3

Reading:

This course is textbook-based. The primary text will be:

Mishkin, Frederic S. The Economics of Money, Banking, and Financial Markets, 9th

Ed. Pearson Education/Addison Wesley, 2010.

You are required to have access to this book. The 2007 8th

edition is acceptable. Earlier

editions are not recommended. You may also wish to order a copy of the accompanying

study guide. The purchase of a new book also includes a subscription to MyEconLab

which contains online study aids, located at www.myeconlab.com/mishkin. Online

chapters not included in the printed textbook are also found at this site.

The other required book for this course is:

Chancellor, Edward. Devil Take the Hindmost: A History of Financial Speculation.

Plume, 2000.

It is also recommended that you read a quality financial newspaper to develop an

understanding of how the course material relates to current events. I recommend reading

one of the following newspapers, either online or in print:

The Financial Times (www.ft.com)

The Wall Street Journal (www.wsj.com)

Supplemental Reading

Similar money and banking texts are available in the library for your reference should the

primary text leave you confused or you want more information. Some of the course

material will be drawn from:

Howells, P and K. Bain. The Economics of Money, Banking and Finance: A European

Text, 3rd

ed. Prentice Hall, 2005.

As a large component of this course if macro-based, you may also wish to consult

a macroeconomics textbook to supplement your understanding. Numerous

macroeconomics books are available, such as Froyen (recommended), Gordon or

Blanchard.

A considerable portion of the course will cover topics related to monetary

economics. You may wish to consult a textbook specifically on monetary economics to

improve your understanding of these topics. The following textbooks are recommended:

Bain, K. and P. Howells. Monetary Economics. Palgrave, 2003.

Handa, Jagdish. Monetary Economics. Routledge, 2000.

The course will also touch on areas covered by international finance. Should you

want further information in this area a good undergraduate level text is:

Pilbeam, Keith. International Finance, 3rd

ed. Palgrave, 2006.

4

Weekly Timetable—Spring 2012 (This schedule is subject to change as events warrant.)

1. Introduction: Money and the Financial System 5, 10 Jan

Readings: Mishkin Chapters 1, 2, 3

2. Understanding Interest Rates 12, 17 Jan

Readings: Mishkin Chapter 4

3. The Behaviour of Interest Rates 19, 24, 26 Jan


4. The Risk and Term Structure of Interest Rates 31 Jan, 2 Feb


5. The Foreign Exchange Market 7, 9 Feb


6. Economic Analysis of Banking 14, 16 Feb


MIDTERM EXAMINATION (Topics 1 – 6) 23 Feb

7. Banking: Management and Regulation 21, 28 Feb; 1 Mar

Readings: Mishkin Chapters 10, 11 (8th

Ed. Ch. 9, 11)

SPRING BREAK (NO LECTURES) 6, 8 March

8. Banking: Structure and Competition 13, 15 March

Readings: Mishkin Chapter 12 (8th

ed. Ch. 10)

9. Central Bank Structure 20 March


Ed. Ch. 12)

10. The Money Supply 22, 27 March


Ed. Ch. 13, 14)

11. Theories of Monetary Policy (1) 29 March, 3 April

Readings: Mishkin Chapter 19, 22

12. Theories of Monetary Policy (II) 5, 10 April

Readings: Mishkin Chapters 25

13. Financial Speculation 12, 17, 19 April

Readings: Chancellor Chapters 1, 2, 3, 6, 7, 8

FINAL EXAMINATION (Topics 7 – 13) TBA

ECON 0280: The Economics of Money,

Banking and the Financial System

Jun 25 - Aug 4, 2012Instructor: Torsten Jochem

Syllabus

1 Overview

Class Time/Place: Mondays & Wednesdays, 6:00 PM - 9:15 PMDepartment of Economics, Posvar Hall, Room 4900

Contact: Torsten Jochem ([email protected])Office: Economics Department, Posvar Hall, Room 4520

Office Hours: 1. Tuesdays, 4-5 PM2. Mondays & Wednesdays after class3. By appointment

Textbook: Mishkin, The Economics of Money, Banking & Financial MarketsAddison-Wesley, 9th or 10th edition (ISBN: 987-0321599797 or 987-0132770248)(the Student Access Kit is not necessary; text-only version is sufficient.)(available used for less $ at half.com, amazon.com, eBay, etc.)

Course Webpage: Courseweb (let me know if you do not have access!)Other Material: I will provide slides and other material for this course. Class slides will be available

after the class on Courseweb.

Grading: 25% midterm exam40% final exam25% Presentation (1 or 2 students)15% in-class exercises, questions and comments to classmates’ presentations

To determine the final course grade:105-93% A, 92-90% A-, 89-87% B+, 86-83% B, 82-80% B-, 79-77% C+, 76-73% C,72-70% C-, 69-67% D+, 66-63% D, 62-60% D-, 0-59% F

Exam Dates: Midterm exam: July 16, 2012Final exam: August 1, 2012

Exam Policy: Only in very exceptional cases, students may be excused from missing an exam.Sufficient written evidence on the exceptional nature must be provided (e.g., adoctor’s note). Make-up exams will only be given for valid exceptional cases.If you know you will miss an exam do talk to me in advance! Once that examsolutions are provided, no make-up exams are any longer given.

1

2 Course Content

2.1 Course Description

The course explains the role that monetary policy and financial markets play in the overall economy. Itwill cover both theoretical models and concepts as well as practical institutional aspects of the financialsystem. Naturally, the course will have a U.S. bias, but some international aspects will be addressed,for example by discussing the current European debt crisis. Finally, we will apply our new understand-ing in the context of the U.S. financial crisis of 2008. We will analyze its origins and evolvement, thegovernment’s policy response and reforms that are currently changing the existing banking and financelandscape.

Please note that this is a 3-credit class. Following university guidelines, one credit hour corresponds toan out-of-class workload of 3 hours per week during a spring/fall semester and 6 hours per week duringa 6-week summer course. I will refrain from touching the upper limit of 18 hours per week, but youshould be aware that summer courses are more work-intense than usual spring/fall course. Please do notoverload yourself with summer courses.

2.2 Course Plan (subject to change as needed)

Week Date Content Chapters

1 Mon, June 25 Function & Structure of Fin. System; Money & Inflation Chapters 1,2,3Wed, June 27 Interest Rates: Behavior, Risk & Term Structure Chapters 4,5,6

2 Mon, July 2 canceled -Wed, July 4 Independence Day – no class -

3 Mon, July 9 Banking: Analysis, Management, Regulation & Structure Chapters 8-12Wed, July 11 Central Bank: Structure & Monetary Policy Tools Chapters 13,14,15

4 Mon, July 16 Midterm Exam -The Foreign Exchange Market & International Finance Chapters 17,18

Wed, July 18 Theories of Monetary Policy I Chapters 19,20,215 Mon, July 23 Theories of Monetary Policy II Chapters 22-25

Wed, July 25 The U.S. Financial Crisis 2007-2010 -6 Mon, July 30 The European Debt Crisis 2009-2012 -

Wed, Aug 1 Final Exam -

2.3 Presentation

This exercise serves to increase your participation in the class and allows you to show off your economicsknowledge and expertise to your classmates! You present alone (10-15 minutes) or in a group of up to 2people (15-20 minutes) an economics topic of your choice to the class. After your presentation there will beup to 5 minutes for comments and questions from your classmates. While a monetary/banking/finance-related topic would be great, it does not need to be one. Rather, you need to make a case to the class whyyour topic matters, why we should be interested in it and – if less obvious – how it relates to economics.The focus of it should be on positive aspects (theories, facts and findings from past research) rather thannormative aspects. Depending on the number of groups, we will have 2-4 presentations at the end ofeach class starting after the midterm exam on July 16. If you like to form a group, let me know by nextweek by email (Wed, July 4), else I will assume you will present by yourself. On July 9, I will provide alist in which you can choose your presentation date (first-come-first-serve). Let me know your topic andprovide a short outline at least one week before your presentation date.

If you are at a loss for a topic, three great places to start searching for topics are:

2

• The Journal of Economic Perspectives: JEP is a highly-regarded economic journal that caters toa non-economic audience by publishing quarterly symposiums on a range of topics. It providesa state-of-the-research discussion of the topic and recent findings (typically without any math).Available online at http://www.aeaweb.org/jep/contents/index.php.

• NPR Planet Money: an excellent, popular Economics Podcast on wide ranging topics. Great as astarting point on specific topics. The latest 100 episodes are online available at http://itunes.

apple.com/us/podcast/npr-planet-money-podcast/id290783428.

• The Economist: popular weekly economics magazine with in-depth reporting on Specials. Freeonline access via http://library.pitt.edu (search for “the economist” and click on the “full textonline” link) or limited preview access at http://www.economist.com.

After the presentation, please provide me with your slides and – very importantly – a list of your sources.Note the school’s policy on plagiarism under 3.2. If you have any questions or something is unclear aboutthe policy, do talk to me.

Deadlines:

• July 4: let me know if you present in a group (else i will assume that you will present by yourself)

• July 9: pick (in class) a date when you will present

• At least one weeks prior to presentation: let me know your topic & provide a short outline

2.4 In-Class Contributions & Exercises

Points for in-class contributions is to increase your participation in class and rewards you for attendance.Occasionally, we will have some activity such as listening to a podcast, watching a movie, or a smallgroup exercise. Before the podcast/movie, I may for example hand out a few questions and ask you tohand in your answers after the end of the podcast/movie. Further, after your classmates’ presentations,we will have a few minutes for discussion and questions. You can earn points by contributing to thosediscussion.

2.5 Feedback

2.5.1 One Minute Sheets

At the end of the class, I will hand out a “One-Minute Sheet” with two questions: (1) “What did youlearn in class today?” (2) “What was the most confusing thing in class today?/What question remainsunanswered?” One-minute sheets are non-graded and anonymous and have two simple goals: First, thestudent recalls the covered material, potentially realizing unresolved questions.1 Second, it provides theteacher with feedback to improve the course and to follow up if some topic remains unclear. If you writedown any questions and provide your name, I will get back to you with a written answer/explanationto your question(s). You can drop off the sheets when leaving the class room in the drop box at theentrance.

2.5.2 Feedback

Few things are as bad for a learning environment as some misunderstanding or conflict. Please do comeand speak to me if you encounter any issues. For the case that you feel hesitant to speak to me in person,there are two ways to provide anonymous feedback: first, you can drop off a message while leaving the

1Research has shown that one-minute sheets significantly improve student grades! (Stead, David R., A Review of theOne-Minute Paper, 2005)

3

http://www.aeaweb.org/jep/contents/index.php

http://itunes.apple.com/us/podcast/npr-planet-money-podcast/id290783428

http://itunes.apple.com/us/podcast/npr-planet-money-podcast/id290783428

http://library.pitt.edu

http://www.economist.com

class room in the drop box at the entrance, or you can send me a message anonymously via an onlineform at http://www.torstenjochem.de/feedback.html. If you choose to provide anonymous feedback,please remember that I will not be able to ask any clarifying questions: hence, please try to be precisewhat exactly the issue is and how you think this issue can be resolved.

3 Miscellaneous

3.1 Disability Statement

If you have a disability for which you are or will be requesting an accommodation, you are encouragedto contact both your instructor, and the Office of Disability Resources and Services, 216 William PittUnion, (412) 648-7890 / (412) 383-7355 (TTY) as early as possible in the term. DRS will verify yourdisability and determine appropriate accommodations for this course.

3.2 Academic Integrity Statement

Cheating/Plagiarism will not be tolerated. Students suspected of violating the University of PittsburghPolicy on Academic Integrity, as stated in the February 1974 Senate Committee on Tenure and AcademicFreedom, will be required to participate in the outlined procedural process as initiated by the instructor.A minimum sanction of a zero score for the presentation, exercise or exam will be imposed.

3.3 Outside Resources

1. Academic Resource Center (ARC): Economics Tutoring; Study Rooms, Study skills; etc. Moreinformation at http://www.as.pitt.edu/undergraduate/offices/arc/.

2. Writing Center: http://www.english.pitt.edu/writingcenter/

3. Math Assistance Center: http://www.as.pitt.edu/undergraduate/success/resource-centers.html#math

4

http://www.torstenjochem.de/feedback.html

http://www.as.pitt.edu/undergraduate/offices/arc/

http://www.english.pitt.edu/writingcenter/

http://www.as.pitt.edu/undergraduate/success/resource-centers.html#math

http://www.as.pitt.edu/undergraduate/success/resource-centers.html#math

1

Course Outline for “Introduction to Money and Banking” (ECON 0280)—Autumn 2012 (Tuesday 6:00)

Course Code and Title: ECON 0280 Introduction to Money and Banking Lecturer: Dr James R. Maloy Office: Posvar 4705 Phone: 412 648 7117 E-mail: [email protected] Office Hours: Tuesday 9:45-10:45; Thursday 1:00-2:00; other times by appointment. Course Aims and Overview: ECON 0280 is a course on the economics of money, banking and financial markets. The course aims to provide the student with an introduction to the role of money, financial markets, financial institutions and monetary policy in the economy, thus providing a solid foundation for further study or employment in the financial services industry. There are three main components of the course. First, the role of financial markets in the economy will be considered with a particular emphasis on bond markets and interest rate determination. The course will then cover the main aspects of banks and other financial institutions before turning to an investigation of the role of money, central banking and monetary policy. Course Delivery: The course will be taught through two weekly lectures. Lectures will be used for lecturing as well as a seminar-type discussion of problem sets. Specific readings for each class are specified below. The lecturer will be available for consultation during advertised office hours or by appointment. Assessment: The course will be assessed by quizzes/assignments, a mid-term examination, a non-cumulative final examination.

• Six in-class quizzes or out-of-class assignments; the average score of the best five of the six will constitute 30% of the final grade.

• A mid-term examination on Topics 1 – 6 will constitute 35% of the final grade. This exam will be held during lecture on Tuesday 23rd October.

• A final examination on Topics 7 – 13 will constitute 35% of the final grade. It will be held on Friday 14th December from 4:00 - 5:50 for students in the

2

Tuesday/Thursday 11:00 lecture or Tuesday 11th December from 6:00 - 7:50 for students in the Tuesday 6:00 lecture.

• Problem sets will be distributed for each topic and will be discussed in class the following week. These are not assessed but are a fundamental part of the course. You are expected to attempt these assignments before coming to class.

You are expected to complete assignments and take examinations on the dates specified. Late submissions of work or re-sits of examinations are only acceptable in extreme circumstances, such as serious illness/injury/death in immediate family/jury duty. A health certificate from a doctor or other evidence will be required. If for any such reason you cannot meet a deadline you must IMMEDIATELY inform me (by email if possible) BEFORE the deadline to arrange make-up work. It is your responsibility to keep me informed of any problems you are having in meeting deadlines. Note: All work submitted for this course must be your own. Any evidence of cheating and/or plagiarism in any assignment will be dealt with as specified by the Academic Integrity Policy, as discussed in the University’s Undergraduate Bulletin. The Office of Disability Resources and Services (216 William Pitt Union, 412-624-7890) is available for students who have requested or may request accommodation for a disability. If needed please contact the office as early as possible in the term. Grading Scale: All grades will be given as percentages out of 100. Final average grades will be calculated by weighting each score according to the weights indicated above and will be rounded to the nearest integer. 92 – 100: A 90 – 91: A- 88 – 89: B+ 82 – 87: B 80 – 81: B- 78 – 79: C+ 72 – 77: C 70 – 71: C- 68 – 69: D+ 62 – 67: D 60 – 61: D- 0 – 59: F

3

Reading: This course is textbook-based. The primary text will be: Burton, Maureen and Bruce Brown. The Financial System and the Economy:

Principles of Money and Banking. 5th Edition. M.E. Sharpe, 2009 You are required to have access to this book. The other required book for this course is: Chancellor, Edward. Devil Take the Hindmost: A History of Financial Speculation. Plume, 2000. It is also recommended that you read a quality financial newspaper to develop an understanding of how the course material relates to current events. I recommend reading one of the following newspapers, either online or in print: The Financial Times (www.ft.com) The Wall Street Journal (www.wsj.com) Supplemental Reading Similar money and banking texts are available in the library for your reference should the primary text leave you confused or you want more information. Some of the course material will be drawn from: Mishkin, Frederic S. The Economics of Money, Banking, and Financial Markets, 9th Ed.

Pearson Education/Addison Wesley, 2010. Howells, P and K. Bain. The Economics of Money, Banking and Finance: A European Text, 3rd ed. Prentice Hall, 2005. As a large component of this course if macro-based, you may also wish to consult a macroeconomics textbook to supplement your understanding. Numerous macroeconomics books are available, such as Froyen (recommended), Gordon or Blanchard. A considerable portion of the course will cover topics related to monetary economics. You may wish to consult a textbook specifically on monetary economics to improve your understanding of these topics. The following textbooks are recommended: Bain, K. and P. Howells. Monetary Economics. Palgrave, 2003. Handa, Jagdish. Monetary Economics. Routledge, 2000. The course will also touch on areas covered by international finance. Should you want further information in this area a good undergraduate level text is: Pilbeam, Keith. International Finance, 3rd ed. Palgrave, 2006.

4

Weekly Timetable—Autumn 2012 (Tuesday 6:00) (This schedule is subject to change as events warrant.)

1. Introduction: Money, the Federal Reserve, and the Financial System 28 Aug, 4 Sept Readings: Burton &Brown Chapters 1, 2, 3, 4

2. Interest Rates and Bond Prices: The Loanable Funds Theory 11, 18 Sept Readings: Burton &Brown Chapter 5

3. The Structure of Interest Rates 18, 25 September Readings: Burton &Brown Chapter 6

4. The Bond Markets 25 September

Readings: Burton &Brown Chapter 13 5. Money Supply and Demand: The Liquidity Preference Theory 2 October Readings: Burton &Brown Chapters 19, 20 LECTURE CANCELLED (AUTUMN BREAK) 9 October 6. The Foreign Exchange Market 16 October

Readings: Burton &Brown Chapter 16

MIDTERM EXAMINATION (Topics 1 – 6) 23 October

7. Financial Intermediaries and Risk 30 October Readings: Burton &Brown Chapter 8

8. Banking: Structure, Regulation, Peformance 30 October


9. Banking: Management 6 November Readings: Handout from Mishkin Chapter 10

10. Banking: Innovation 13 November


11. Banking: Regulation 13 November Readings: Burton &Brown Chapter 12 12. Theories of Monetary Policy (1) 20 November

Readings: Burton & Brown Chapter 22, lecture notes

13. Theories of Monetary Policy (II) 27 November Readings: lecture notes

14. Financial Manias and Crises 4 December

Readings: Burton &Brown Chapter 11, Chancellor Chapters 1, 2, 3, 4, 5, 6

FINAL EXAMINATION (Topics 7 – 14) Friday 14th December from 4:00 - 5:50 for students in the Tuesday/Thursday 11:00 lecture. Tuesday 11th December from 6:00-7:50 for students in the Tuesday 6:00 lecture.

1

Course Outline for “Introduction to Money and Banking” (ECON 0280)—Autumn 2012 (Tuesday/Thursday 11:00)

Course Code and Title: ECON 0280 Introduction to Money and Banking Lecturer: Dr James R. Maloy Office: Posvar 4705 Phone: 412 648 7117 E-mail: [email protected] Office Hours: Tuesday 9:45-10:45; Thursday 1:00-2:00; other times by appointment. Course Aims and Overview: ECON 0280 is a course on the economics of money, banking and financial markets. The course aims to provide the student with an introduction to the role of money, financial markets, financial institutions and monetary policy in the economy, thus providing a solid foundation for further study or employment in the financial services industry. There are three main components of the course. First, the role of financial markets in the economy will be considered with a particular emphasis on bond markets and interest rate determination. The course will then cover the main aspects of banks and other financial institutions before turning to an investigation of the role of money, central banking and monetary policy. Course Delivery: The course will be taught through two weekly lectures. Lectures will be used for lecturing as well as a seminar-type discussion of problem sets. Specific readings for each class are specified below. The lecturer will be available for consultation during advertised office hours or by appointment. Assessment: The course will be assessed by quizzes/assignments, a mid-term examination, a non-cumulative final examination.


• A mid-term examination on Topics 1 – 6 will constitute 35% of the final grade. This exam will be held during lecture on Tuesday 23rd October.

• A final examination on Topics 7 – 13 will constitute 35% of the final grade. It will be held on Friday 14th December from 4:00 - 5:50 for students in the

2

Tuesday/Thursday 11:00 lecture or Tuesday 11th December from 6:00 - 7:50 for students in the Tuesday 6:00 lecture.



3




4

Weekly Timetable—Autumn 2012 (Tuesday/Thursday 11:00) (This schedule is subject to change as events warrant.)

1. Introduction: Money, the Federal Reserve, and the Financial System 28, 30 August, Readings: Burton &Brown Chapters 1, 2, 3, 4 4, 6 September

2. Interest Rates and Bond Prices: The Loanable Funds Theory 11, 13, 18 Sept Readings: Burton &Brown Chapter 5



Readings: Burton &Brown Chapter 13 5. Money Supply and Demand: The Liquidity Preference Theory 2, 4 October Readings: Burton &Brown Chapters 19, 20 LECTURE CANCELLED (AUTUMN BREAK) 9 October 6. The Foreign Exchange Market 11, 16 October


7. Financial Intermediaries and Risk 18 October Readings: Burton &Brown Chapter 8 MIDTERM EXAMINATION (Topics 1 – 6) 23 October

8. Banking: Structure, Regulation, Peformance 25 October


9. Banking: Management 30 Oct; 1 Nov Readings: Handout from Mishkin Chapter 10



11. Banking: Regulation 8 November Readings: Burton &Brown Chapter 12 12. Theories of Monetary Policy (1) 13, 15, 20 Nov

Readings: Burton & Brown Chapter 22, lecture notes NO LECTURE (THANKSGIVING) 22 November


14. Financial Manias and Crises 29 Nov, 4, 6 Dec


FINAL EXAMINATION (Topics 7 – 14) Friday 14th December from 4:00 - 5:50 for students in the Tuesday/Thursday 11:00 lecture. Tuesday 11th December from 6:00-7:50 for students in the Tuesday 6:00 lecture.

1

Course Outline for “Introduction to Money and Banking” (ECON 0280)—Autumn 2013

Course Code and Title: ECON 0280 Introduction to Money and Banking Lecturer: Dr James R. Maloy Office: Posvar 4705 Phone: 412 648 7117 E-mail: [email protected] Office Hours: Tuesday 4:00 - 5:00; Thursday 1:00-2:00; other times by appointment. Course Aims and Overview: ECON 0280 is a course on the economics of money, banking and financial markets. The course aims to provide the student with an introduction to the role of money, financial markets, financial institutions and monetary policy in the economy, thus providing a solid foundation for further study or employment in the financial services industry. There are three main components of the course. First, the role of financial markets in the economy will be considered with a particular emphasis on bond markets and interest rate determination. The course will then cover the main aspects of banks and other financial institutions before turning to an investigation of the role of money, central banking and monetary policy. Course Delivery: The course will be taught through two weekly lectures. Lectures will be used for lecturing as well as a seminar-type discussion of problem sets. Specific readings for each class are specified below. The lecturer will be available for consultation during advertised office hours or by appointment. Assessment: The course will be assessed by quizzes/assignments, a mid-term examination, a non-cumulative final examination.


• A mid-term examination on Topics 1 – 6 will constitute 35% of the final grade. This exam will be held during lecture on Tuesday 22nd October.

• A final examination on Topics 7 – 13 will constitute 35% of the final grade. It will be held on Saturday 14th December from 4:00 - 5:50 for students in the

2

Tuesday/Thursday 9:30 lecture or Saturday 14th December from 8:00 - 9:50 for students in the Tuesday/Thursday 11:00 lecture.



3




4

Weekly Timetable—Autumn 2013 (This schedule is subject to change as events warrant.)





Readings: Burton &Brown Chapter 13 5. Money Supply and Demand: The Liquidity Preference Theory 1, 3 October Readings: Burton &Brown Chapters 19, 20 6. The Foreign Exchange Market 8, 10 October


LECTURE CANCELLED (AUTUMN BREAK) 15 October


8. Banking: Structure, Regulation, Peformance 24, 29 October


9. Banking: Management 31 Oct, 5 Nov Readings: Handout from Mishkin Chapter 10


Readings: Burton &Brown Chapter 10 11. Theories of Monetary Policy (1) 12, 14, 19 Nov



NO LECTURE (THANKSGIVING) 28 November

13. Financial Manias and Crises 26 Nov, 3, 5 Dec Readings: Burton &Brown Chapter 11, Chancellor Chapters 1, 2, 3, 4, 5, 6

FINAL EXAMINATION (Topics 7 – 13) Saturday 14th December at 4:00-:5:50 for the Tuesday/Thursday 9:30 lecture Saturday 14th December at 8:00-9:50 for the Tuesday/Thursday 11:00 lecture

“Introduction to Money and Banking” (ECON 0280) Summer 2014

Monday/Wednesday 6pm-9.15pm, June 23 – July 30, 2014 Instructor’s Information Conor Lennon Office: Posvar 4911 Contact: [email protected] Office Hours: 5-6pm Monday and Wednesday Course Aims and Overview ECON 0280 is a course on the economics of money, banking and financial markets. The course provides students with an introduction to the concept, purpose, history, and evolution of money in the economy. The course will also introduce financial markets, financial institutions, and examine how monetary policy (the decisions of the Federal Reserve) affects the economy. The course will have an applicability focus but will also provide students with a solid theoretical foundation for further study and help prepare you to succeed in the financial and government sectors, among others. The course will introduce the concept of money and financial assets. We will then proceed to examine the markets and institutions which have evolved to facilitate trade and to regulate financial assets. First, we will examine the role of financial markets in the economy, with particular emphasis on how (and at what price) money is transferred from those who have more than they currently want to those who desire to “borrow” money/financial assets. The course will then turn to a study of how financial institutions facilitate these transactions. Lastly, we will examine how central banking and monetary policy affects the economy, both through day-to-day actions and through the regulatory framework that has been created. Key Skills and Core Concepts At the end of this course you will have learned the following key skills that will be an asset to you in the future;

1. You will be able to meaningfully compare streams of income and expenses that can occur at different times, are of different amounts, and which might be uncertain in nature. That is, you will be able to quantitatively compare financial assets.

2. You will be able to explain to others the difference between various financial assets, why they exist, who might like to buy (and sell) them, and how they contribute to the broader economy.

3. You will be able to describe the role of the different types of banks that exist - how the government and the banking system “creates money”, how banks stay in business, and why they sometimes “fail.”

4. You will be able to interpret the policy choices of any central bank, how it affects the prices of financial assets, financial products, financial services, and the interest rate paid on borrowings. Most importantly, you will be able to illustrate to others how businesses and individuals are affected by monetary policy decisions.

5. Lastly, for those most interested in future study and/or jobs in the financial sector, or with the Federal Reserve itself, you will be introduced to the theory that underpins central banking and monetary policy decisions. This skill is different to skill four in a crucial dimension. Skill 4 will allow you to determine the effects of central bank decisions. Skill 5 will allow you to explain why those decision were made.

1

Course Delivery We will meet twice weekly in Posvar 4900. Lectures will be used for instruction, student presentations, learning activities, and discussion. You are required to read the relevant chapters prior to coming to class. Please refer to the course outline for details. Due to the intense nature of this course, traditional office hours are always a challenge and may have to be adjusted frequently to accommodate increased demand for meetings. Assessment Learning will be assessed through a combination of tangible in-class participation, homework assignments, chapter summary assignment, a mid-term examination, and a final examination. There will be;

• Six homework assignments, the best five of these will constitute 10% of the final grade. Each of the best five will contribute 2% to your overall grade. These assignments will be due one week from the date they are assigned.

o Taking time with and really understanding the homework assignment will help you do well on exams as the questions will be similar.

o Five homework assignments will use MyEconLab. Instructions for accessing the website are provided later in this document.

• A mid-term examination will constitute 25% of the final grade. The exam will be held during the

lecture on Wednesday the 9th of July. The exam will last 2 hours. The exam will cover only material that we have covered up to the end of class on July 7th. The midterm will be a mix of multiple choice and worked problems.

• A cumulative final (2 hours) in class on our final class date. The final will be worth 35% of your grade. The final will be a mix of multiple choice and worked problems.

• Weekly chapter summary assignments which will be worth 10% of your grade. You will earn the full 10% for turning in five completed summaries in on time. There will be a 2% penalty for missing assignments and 1% for submitting summaries late. If completed and submitted, the summaries are a great way to boost your grade and prepare for exams simultaneously. See “reading” section for more information.

• Finally, participation in learning activities in the classroom (and by extension attendance) will count for 20% of your final grade. Missing class periods without a valid medical reason or emergency situation will result in forfeit of 2% of your participation points. That is, missing a class would reduce the maximum possible points to 18%. Participation in class activities consists of three components

o Minute Papers at the end of class Provides feedback to me about what was clear and what was not clear.

o Media exercises During class we will examine media/news items upon which you will answer

questions. This may take the form of a news article or a radio or video clip. These clips will be carefully selected to shed light on class material. The answers given

2

to the questions on these news items will be graded and form part of your participation points.

o Short written exercises During class I will ask you to take a minute, think about or work through a

problem, and share your answer/ideas with class if you are comfortable doing so. Completing the exercises is required.

I will examine these exercises – it helps me check that you are actively learning and maintains attendance records.

NOTE: Missing more than one class meeting without a valid medical excuse or my explicit permission will automatically result in a failing grade being assigned regardless of performance on exams and other assignments. One class is equal to 3 or more classes in a regular semester. It is not possible to miss two class meetings while still satisfying the requirements of the course. You are expected to complete assignments and take examinations on the dates specified. Late submissions of work or re-sits of examinations are only acceptable in extreme circumstances, such as serious illness/injury/death in immediate family/jury duty. A health certificate from a doctor or other evidence will be required. If for any such reason you cannot meet a deadline you must inform me (by email if possible) before the deadline. It is your responsibility to keep me informed of any problems you are having in meeting deadlines. Please note that all work submitted for this course must be your own. Students in this course will be expected to comply with the University of Pittsburgh's Policy on Academic Integrity. Any student suspected of violating this obligation for any reason during the semester will be required to participate in the procedural process, initiated at the instructor level, as outlined in the University Guidelines on Academic Integrity. This may include, but is not limited to, the confiscation of the examination of any individual suspected of violating University Policy. Furthermore, no student may bring any unauthorized materials to an exam, including dictionaries and programmable calculators. If you have a disability that requires special testing accommodations or other classroom modifications, you need to notify both the instructor and Disability Resources and Services no later than the second week of the term. You may be asked to provide documentation of your disability to determine the appropriateness of accommodations. To notify Disability Resources and Services, call (412) 648-7890 (Voice or TTD) to schedule an appointment. The Disability Resources and Services office is located in 140 William Pitt Union on the Oakland campus. If needed please contact the office as early as possible in the term. To ensure the free and open discussion of ideas, students may not record classroom lectures, discussion and/or activities without the advance written permission of the instructor, and any such recording properly approved in advance can be used solely for the student’s own private use. Class materials may be protected by copyright. United States copyright law, 17 USC section 101, et seq., in addition to University policy and procedures, prohibit unauthorized duplication or retransmission of course materials. See Library of Congress Copyright Office and the University Copyright Policy.

3

Grading Scale Each graded task associated with this class will be given a score out of 100. Final grades will be calculated by weighting each score according to the weights indicated in the “Assessment” section above and will be rounded to the nearest integer to provide a final percentage score out of 100. These scores will be converted to letter grades as follows: A range 90-100 – A- = 90-93, A = 94 or above B range 80-90 - B- = 80-83, B = 84 to 86, B+ = 87 to 89 C range 70-80 - C- = 70-73, C = 74 to 76, C+ = 77 to 79 D range 60-70 - D- = 60-63, D = 64 to 66, D+ = 67 to 69 F = <60 Incomplete grades will only be awarded in extreme circumstances and with the agreement of the instructor who teaches the class when it is next offered. As noted in the prior section, missing more than 2 classes without a valid excuse (as outlined earlier) will automatically result in a failing grade being assigned. Reading The primary text will be: Introduction to Money, Banking, and Financial Markets (10th Edition) by Frederic Mishkin, published by Prentice Hall. You will need to have access to this book, and in a pinch the 9th edition will suffice. However, we will be using the resources of MyEconLab for homework assignments and you will need to purchase a student access kit (available online and from the campus bookstore) if you do not buy a new copy of the book. Each Wednesday, you must submit a one-page summary of one chapter from that week’s material. For example, in Week 1, we will cover chapters 1 through 4 and perhaps some of Chapter 5. You can choose any one of these five chapters. I will provide a format/template for the chapter summary that you can view on Courseweb (see Course Documents – Week 1). If you stick to that template, you will earn full marks for your chapter summary. These chapter summaries are crucial in a summer class which is compressed by its nature. I encourage you to view these as a study aid and to partner with others to share your chapter summaries before the midterm and final exams. I also highly recommend visiting the home pages of a financial newspaper/publication and reading one or two articles to see how what you are learning can help you understand the world around you. Some of the best options are The Wall Street Journal (www.wsj.com) and The Economist magazine (www.economist.com). Occasionally I may ask you to read and be prepared to talk about a specific article in class if there is a major financial event that occurs during the term.

4

http://www.wsj.com/

http://www.economist.com/

Weekly Timetable—Summer 2014 (Monday/Wednesday 6pm, Posvar 4900) Week

Topic Chapter Number and Title

Week 1 Introduction to Money

3. What Is Money? 1. Why Study Money, Banking, and Financial Markets? 2. An Overview of the Financial System 4. Understanding Interest Rates

Week 2 Financial Markets 5. The Behavior of Interest Rates 6. The Risk and Term Structure of Interest Rates (optional) 7. The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis 8. Analysis of Financial Structure 9. Financial Crises Guest Lecture (45 mins) – Topic TBC

Week 3 The Banking System and Financial Institutions

10. Banking and the Management of Financial Institutions 11. Economic Analysis of Financial Regulation (optional) 12. Banking Industry: Structure and Competition MIDTERM EXAM July 9

Week 4 Introduction to Monetary Policy

13. Central Banks and the Federal Reserve System 14. The Money Supply Process 15. Tools of Monetary Policy

Week 5 Monetary Policy 16. The Conduct of Monetary Policy: Strategy and Tactics 19. Quantity Theory, Inflation, and the Demand for Money 20. The IS Curve (time permitting) 21. Monetary Policy and Aggregate Demand Curves (time permitting) 22. Aggregate Demand and Supply Analysis

Week 6 Monetary Policy

23. Monetary Policy Theory Exam review FINAL EXAM July 30

5

MyEconLab Access

How to Register and Enroll in Your MyEconLab.com Course

Textbook: Mishkin: The Economics of Money, Banking and Financial Markets, 10/E Course Name: Econ 0280 Mishkin Course ID: lennon92867

Detailed help can be found at http://pearsonmylabandmastering.com/students/. To join your instructor's course, please complete the following two steps:

1. Register for MyEconLab 2. Enroll in your instructor's course

To register, you will need:

1. A valid e-mail address (please use your pitt.edu email) 2. The access code that came with your MyEconLab Kit or a credit card or Pay Pal account if you

wish to purchase access online. 3. The Course ID listed above.

Please Note: If you have an Access Kit that came with your book or that you purchased separately, the instructions may be different than what you are reading here. Please disregard those instructions and follow the steps below. The code in your kit is still valid for the version of MyEconLab that your instructor is using.

Step 1: Register for MyEconLab

1. Go to www.myeconlab.com/legacy/login and click the Student button, in the Register section. 2. Enter the Course ID 3. Choose to register an access code or to buy access. 4. Follow the instructions to set up your login and password for your course.

Step 2: Enroll in your instructor's course

1. Login to MyEconLab at www.myeconlab.com/legacy/login with your newly created Login Name and Password.

2. Enter the course ID:

If you purchased access, visit the Student Center inside your Instructor's Course for additional purchase options Note: If you are taking two MyEconLab courses simultaneously you will need two separate login accounts. Need Help? For assistance, please visit http://www.myeconlab.com/support

6

http://pearsonmylabandmastering.com/students/

http://www.myeconlab.com/legacy/login

http://www.myeconlab.com/legacy/login

http://www.myeconlab.com/support

1

Course Outline for “Introduction to Money and Banking” (ECON 0280)—Autumn 2014

Course Code and Title: ECON 0280 Introduction to Money and Banking Lecturer: Dr James R. Maloy Office: Posvar 4705 Phone: 412 648 7117 E-mail: [email protected] Office Hours: Tuesday 3:00 - 4:00; Thursday 9:30-10:30; other times by appointment. Course Aims and Overview: ECON 0280 is a course on the economics of money, banking and financial markets. The course aims to provide the student with an introduction to the role of money, financial markets, financial institutions and monetary policy in the economy, thus providing a solid foundation for further study or employment in the financial services industry. There are three main components of the course. First, the role of financial markets in the economy will be considered with a particular emphasis on bond markets and interest rate determination. The course will then cover the main aspects of banks and other financial institutions before turning to an investigation of the role of money, central banking and monetary policy. Course Delivery: The course will be taught through two weekly lectures. Lectures will be used for lecturing as well as a seminar-type discussion of problem sets. Specific readings for each class are specified below. The lecturer will be available for consultation during advertised office hours or by appointment. Assessment: The course will be assessed by quizzes/assignments, a mid-term examination, a non-cumulative final examination.


• A mid-term examination on Topics 1 – 6 will constitute 35% of the final grade. This exam will be held during the lecture on Tuesday 21st October.

• A final examination on Topics 7 – 13 will constitute 35% of the final grade. It will be held on Friday 12th December from 4:00PM - 5:50PM

2



3




4

Weekly Timetable—Autumn 2014 (This schedule is subject to change as events warrant.)





Readings: Burton &Brown Chapter 13 5. Money Supply and Demand: The Liquidity Preference Theory 30 Sept, 2 Oct Readings: Burton &Brown Chapters 19, 20 6. The Foreign Exchange Market 7, 9 October


NO LECTURE (AUTUMN BREAK) 14 October


8. Banking: Structure, Regulation, Peformance 23, 8 October


9. Banking: Management 30 Oct, 4 Nov Readings: Handout from Mishkin Chapter 10


Readings: Burton &Brown Chapter 10 11. Theories of Monetary Policy (1) 11, 13, 18 Nov


12. Theories of Monetary Policy (II) 20, 25 November Readings: lecture notes

NO LECTURE (THANKSGIVING) 27 November

13. Financial Manias and Crises 2, 4 Dec Readings: Burton &Brown Chapter 11, Chancellor Chapters 1, 2, 3, 4, 5, 6

FINAL EXAMINATION (Topics 7 – 13) Friday 12th December at 4:00PM – 5:50PM

UNIVERSITY OF PITTSBURGH FALL 2015

ECON 0280 – Introduction to Money and Banking TEACHER: Stanko Racic OFFICE/PHONE: 282 Mervis Hall / 412-648-1522 PLACE: 314 Bellefield Hall OFFICE HOURS: Tu Th 2:45 – 3:45 PM TIME: Tu Th 4:00 – 5:15 PM E-MAIL: [email protected] CLASS WEB SITE: http://www.pitt.edu/~stanko/mon-bnk

Text Hubbard, G., A.P. O’Brien, Money, Banking and the Financial Systems, 2nd Ed., Pearson, 2014. Course Prerequisites: ECON 0110 Introduction to Macro or ECON 0800 Introduction to Economics Course Objective To provide students with an introduction to the interest rates (what are they, how are they determined, etc.), the role of the money in the economy (by looking at its definition, creation, uses and impact on the economy) and other financial assets, the financial system, the operation and regulation of financial markets and institutions, as well as theory and practice of monetary policy. Studying Strategies (http://intelicus.com/10-effective-study-habits/) I would highly recommend you to work in study groups. Go through the readings before lecture. If lecture does not clear your questions from readings, ask me. Make the help sheet for the chapter before doing the homework. Update the help sheet if it is not sufficient to do the homework problems. Combine updated help sheets for different chapters into help sheet for the exam. Grading Homework: 18 assignments, due at the beginning of indicated class, worth 5% of your grade Your effort, rather than whether the solution is correct, will be graded. Try to solve the problems, but do not spend too much time on them if you have difficulties. Solutions are on the class web site. If you cannot figure out how to do the problems please see me and I will help you with the problem. Quizzes: 17 best of 18, 10 multiple choice questions at the end of indicated class, worth 10% Exams: the worst of 4 non-cumulative worth 12%, each of other three 17%, cumulative final 22% All exams will have multiple choice questions only covering conceptual and computational problems. You may bring one 8½x11 help sheet for each exam. You can put what ever you want on both pages of the help sheet. Makeup exams will be provided only due to an unforeseen event. I have to be informed no later than 24 hours after the exam. Documented confirmation will be required. No phones are allowed during any test. No extra credit is available. Your cumulative percentages grade will be divided by the highest cumulative percentage grade in the class, and then translated into letter grades as follows: 100 -97 = A+ 89.9-87 = B+ 79.9-75 = C+ 65.9-60 = D+ 49.9-0 = F 96.9-93 = A 86.9-83 = B 74.9-70 = C 59.9-55 = D 92.9-90 = A- 82.9-80 = B- 69.9-65 = C- 54.9-50 = D-

http://www.pitt.edu/~stanko/mon-bnk

Course Outline Date Topic Homework/Quiz Sep 1 Ch 1: Introducing Money & Financial System Sep 3 Ch 2: Money & Payment System Ch 1: 1.1-5,7,12; 2.2-4 Sep 8 Ch 3:Interest Rates & Rates of Return Ch 2: 1.1-2,7; 2.1-4; 3.2,3; 4.1-6; 5.2-5 Sep 10 Ch 4:Determining Interest Rates Ch 3: 1.1-3,6;2.1-3;3.1-9;4.2,7; 5.1-3;6.1,3,5 . Sep 15 Ch 5: Risk & Term Structure of Interest Rates Ch 4: 1:3,4; 2.1,2,5; 3.1-3; 4.2-4,6,7 Review for Exam 1 Sep 17 Exam 1 (Chapters 1 – 4) Sep 22 Ch 6: Stock Market, Info & Market Efficiency Ch 5: 1.2-6,9; 2.1-7 Spe 22 Ch 7: Derivatives & Derivatives Markets Ch 6: 1.1-3,5,6; 2.1-8; 3.1-3,7; 4.1-4 Sep 29 Ch 8: Foreign Exchange Market Ch 7: 1.1-4; 2.1,2,4; 3.1-4,9; 4.1-4,6; 5.1-3 Oct 1 Review for Exam 2 Ch 8: 1.1-3,5,7; 2.3,4 Oct 6 Exam 2 (Chapters 5 – 8) Oct 8 Ch 9: Transact, Asymmetric Info & Fin System Oct 13 Ch 10: Economics of Banking Ch 9: 1.2-5; 2.1-5,7,9,11,13-4; 3.1-3,5 Oct 15 Ch 11: Intermed & Shadow Banking System Ch 10: 1.1,3,4; 2.1-4.8; 3.1-5; 4.1-6 Oct 20 No Class Oct 22 Ch 12: Financial Crises and Regulation Ch 11: 1.1-3,5,6,8; 2.1-4; 3.1-6; 4.1,2 Oct 27 Review for Exam 3 Ch 12: 1.1-4; 2.1-4; 3.1-3,5; 4.1-3 Oct 29 Exam 3 (Chapters 9 – 12) Nov 3 Ch 13: FED & Central Banking Nov 5 Ch 14: FED’s Balance Sheet & Money Supply Ch 13: 1.1-6; 2.1-3; 3.1-4 Nov 10 Ch 15: Monetary Policy Ch 14: 1.1-3; 2.1-5,7; 3.1-4,7 Nov 12 Ch 16: Internat. Fin System &Monetary Policy Ch 15: 1.1-4,9; 2.1-7; 3.1-4; 4.1-7,11 Nov 17 Review for Exam 4 Ch 16: 1.1-8; 2.1-6; 3.1-8; 4.1-5,9,10,12 Nov 19 Exam 4 (Chapters 13 – 16) Nov 24 – 26 Thanksgiving Receese – No Classes Dec 1 Ch 17: Monetary Theory I Dec 3 Ch 17: Monetary Theory I Ch 18: Monetary Theory II Dec 8 Ch 18: Monetary Theory II Ch 17: 1.1-7; 2.1-6; 3.1-5,7,9; 4.1-5 Dec 10 Review for Final Exam Ch 18: 1.1-10; 2.1-5,9; 3.1-4,8; 4.1-5 Dec 12-19 Final Exam (Cumulative)

1

Course Outline for “Introduction to Money and Banking” (ECON 0280)—Spring 2016

Course Code and Title: ECON 0280 Introduction to Money and Banking Lecturer: Dr James R. Maloy Office: Posvar 4705 Phone: 412 648 7117 E-mail: [email protected] Office Hours: Tuesday 4:00 - 5:00, Thursday 1:00-2:00; other times by appointment. Course Aims and Overview: ECON 0280 is a course on the economics of money, banking and financial markets. The course aims to provide the student with an introduction to the role of money, financial markets, financial institutions and monetary policy in the economy, thus providing a solid foundation for further study or employment in the financial services industry. There are three main components of the course. First, the role of financial markets in the economy will be considered with a particular emphasis on bond markets and interest rate determination. The course will then cover the main aspects of banks and other financial institutions before turning to an investigation of the role of money, central banking and monetary policy. Course Delivery: The course will be taught through two weekly lectures. Lectures will be used for lecturing as well as a seminar-type discussion of problem sets. Specific readings for each class are specified below. The lecturer will be available for consultation during advertised office hours or by appointment. Assessment: The course will be assessed by quizzes/assignments, a mid-term examination, a non-cumulative final examination.

• Two short out-of-class assignments on the supplementary Chancellor book will constitute 10% of the final grade (5% each). Assignment due dates will be announced as appropriate.

• A mid-term examination on Topics 1 – 6 will constitute 35% of the final grade. This exam will be held during your scheduled lecture on Thursday 3rd March.

2

• A final examination on Topics 7 – 12 will constitute 35% of the final grade. Note that although it not explicitly cumulative, you are responsible for knowing any relevant material from the first six topics. You must attend at your officially scheduled lecture time, as follows:

Tuesday/Thursday 8:00 Lecture: Thursday 28th April 10:00 - 11:50 Tuesday/Thursday 9:30 Lecture: Monday 25th April 8:00 - 9:50 • A short quiz (probably two true/false questions) will be given at the beginning of

each lecture (other than exam days or if other events warrant) and your quiz grade will constitute 20% of your overall course grade. It will essentially be grading you on turning up and having some clue about what is going on in class. Quizzes will be assessed as follows:

o Miss 0-3 quizzes over the course of the term: 100%. Grade will be reduced 5% for each additional missed quiz beyond 3. Ex: missing six quizzes will result in a 15% deduction, thus an 85% quiz grade.

o If the overall average from all completed quizzes is less than 50%, then an additional 10% will be reduced from your quiz grade. Ex: Miss six quizzes and quiz grade on the remaining quizzes is less than 50%, your quiz grade will be 75%.

o You are not permitted to turn up, do the quiz, and then immediately leave the class. Your quiz will not be graded and will constitute a missed quiz.

o The quiz average will not be reduced to less than 0%, so if you choose to never attend lectures you will not have a negative quiz grade.

o The system is fairly generous in that you can miss multiple classes before earning a low quiz grade. Therefore absences due to normal issues such as illness, job interviews, etc. will still count as a missed quiz. There will be no make-up quizzes. Therefore, should you choose to skip a bunch of classes due to hangovers or playing Fallout 4 you will probably find yourself in trouble if you then need to miss classes due to illness or the like. Exceptions will only be made for very severe issues resulting in an extended absence from the University.

• Problem sets will be distributed for each topic and will be discussed in class as time permits. These are not assessed but are a fundamental part of the course, as they are essentially practice exams. You are expected to attempt these assignments before coming to class.

You are expected to complete assignments and take examinations on the dates specified. Late submissions of work or re-sits of examinations are only acceptable in extreme circumstances, such as serious illness/injury/death in immediate family/jury duty. A health certificate from a doctor or other evidence will be required. If for any such reason you cannot meet a deadline you must IMMEDIATELY inform me (by email if possible) BEFORE the deadline to arrange make-up work. It is your responsibility to keep me informed of any problems you are having in meeting deadlines. Note: All work submitted for this course must be your own. Any evidence of cheating and/or plagiarism in any assignment will be dealt with as specified by the Academic Integrity Policy, as discussed in the University’s Undergraduate Bulletin.

3

The Office of Disability Resources and Services (216 William Pitt Union, 412-624-7890) is available for students who have requested or may request accommodation for a disability. If needed please contact the office as early as possible in the term. Grading Scale: All grades will be given as percentages out of 100. Final average grades will be calculated by weighting each score according to the weights indicated above and will be rounded to the nearest integer. 92 – 100: A 90 – 91: A- 88 – 89: B+ 82 – 87: B 80 – 81: B- 78 – 79: C+ 72 – 77: C 70 – 71: C- 68 – 69: D+ 62 – 67: D 60 – 61: D- 0 – 59: F Reading: This course is textbook-based. The primary text will be: Burton, Maureen and Bruce Brown. The Financial System and the Economy:

Principles of Money and Banking. 5th Edition. M.E. Sharpe, 2009 You are required to have access to this book. The other required book for this course is: Chancellor, Edward. Devil Take the Hindmost: A History of Financial Speculation. Plume, 2000. It is also recommended that you read a quality financial newspaper to develop an understanding of how the course material relates to current events. I recommend reading one of the following newspapers, either online or in print: The Financial Times (www.ft.com) The Wall Street Journal (www.wsj.com)

4

Supplemental Reading Similar money and banking texts are available in the library for your reference should the primary text leave you confused or you want more information. Some of the course material will be drawn from: Mishkin, Frederic S. The Economics of Money, Banking, and Financial Markets, 9th Ed.


5

Weekly Timetable—Spring 2016 (This schedule is subject to change as events warrant.)

1. Introduction: Money, the Federal Reserve, and the Financial System 7, 12, 14, 19, 21 Readings: Burton & Brown Chapters 1, 2, 3, 4 January

2. Interest Rates and Bond Prices: The Loanable Funds Theory 26, 28 January Readings: Burton & Brown Chapter 5 2 February

3. The Structure of Interest Rates 4, 9 February Readings: Burton & Brown Chapter 6

4. The Bond Markets 11 February

Readings: Burton & Brown Chapter 13 5. Money Supply and Demand: The Liquidity Preference Theory 16, 18 February Readings: Burton & Brown Chapters 19, 20 6. The Foreign Exchange Market 23, 25 February

Readings: Burton & Brown Chapter 16

7. Financial Intermediaries and Risk 1 March Readings: Burton & Brown Chapter 8

MIDTERM EXAMINATION (Topics 1 – 6) 3 March NO LECTURE (SPRING BREAK) 8, 10 March

8. Banking: Structure, Regulation, Peformance 15, 17 March

Readings: Burton & Brown Chapter 9

9. Banking: Management 22, 24 March Readings: Handout from Mishkin Chapter 10

10. Introduction to Financial Derivatives 29 March

Readings: Burton & Brown Chapter 10 p. 216-220 Burton & Brown Chapter 17

11. Theories of Monetary Policy (1) 31 March

Readings: Burton & Brown Chapter 22, lecture notes 5, 7 April

12. Theories of Monetary Policy (II) 12, 14 April Readings: lecture notes

13. Financial Manias and Crises 19, 21 April


FINAL EXAMINATION (Topics 7 – 12) Tuesday/Thursday 8:00 Lecture: Thursday 28th April 10:00 - 11:50 Tuesday/Thursday 9:30 Lecture: Monday 25th April 8:00 - 9:50