Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Real bills doctrine wikipedia , lookup
Global financial system wikipedia , lookup
Business cycle wikipedia , lookup
Monetary policy wikipedia , lookup
Fractional-reserve banking wikipedia , lookup
Interest rate wikipedia , lookup
Austrian business cycle theory wikipedia , lookup
Modern Monetary Theory wikipedia , lookup
Helicopter money wikipedia , lookup
ST. FRANCIS COLLEGE Course Title and Course Number: Money and Banking/ ECO 2306 Course Credits & Prerequisite: Three Credits/ ECO 1201 Course Hours: Wednesdays, 6-9PM Course Location: tbd Course Instructor: Cameron M. Weber Office Hours: before class and by appointment Office Hours Location: 4201 E-mail Address: [email protected] Website: cameroneconomics.com (relevant class materials found under “teaching” page) Course description in catalogue: Money and credit; commercial banking; central banking; monetary theory and practice; financial regulation. Course Objectives: learning financial terms and concepts exploring the role of money in the economy studying financial institutions and markets; and how they are related to each other understanding the concept of interest, and calculation of interest rates based on yield to maturity examining the behavior of interest rates with respect to factors responsible for changing equilibrium interest rates studying the U.S. banking industry: its history, structure, and regulation understanding the Federal Reserve System with respect to its structure, economic goals, monetary targets, and monetary tools developing a critical approach to the conduct of the monetary policy of the Fed, and its impact on the contemporary U.S. economy Course Outline: Prequel: Review of “thinking like an economist” I. Keynesian vs. Hayekian ideal-types: aggregate modeling vs. growth economics II. Keynesian vs. Hayekian ideal-types: differing views on business cycle, economy as a system vs. economy as process, stability vs. creative destruction Lecture, Hayek vs. Keynes youtube, Quantitative Easing Explained youtube PART I: Introduction to Money and Banking I. Functions of money Chapter 3 II. Money and capitalism in historical context; early capitalism and the gold standard, modern capitalism, Bretton Woods and fiat money Ch. 2 & 21, Lecture III. Relationship between money and the real economy; classical equation of Exchange (MV=PQ); velocity of money; Keynesian, Monetarist, Austrian views on money supply effects; “skyscraper index” Ch. 1& 22, Lecture IV. Distributional effects of inflation Doug French youtube, Lecture V. Evolution of payments system; commodity money, fiat money, checks, electronic payments, e-money Ch. 3 VI. Class discussion on Bitcoins VII. Definition of money supply, M1, M2, MZM Ch. 3 VIII. Introduction to fractional reserve banking; money multiplier, Federal Open Market Committee (FOMC) operations Ch. 17, Lecture PART II: Financial Markets Introduction to interest rates; the “natural rate” of interest, the Loanable Funds market; government borrowing and “crowding out” Lecture, Ch. 5 II. Forms of business enterprises; sole proprietorship, general and limited Partnerships, corporations; debt and equity capitalization; Initial Public Offerings (IPOs) and secondary markets Ch. 2, Lecture III. Portfolio vs. Foreign Direct Investment capital flows Ch. 22 IV. Introduction to bond term structures and risk classifications; sovereign, Government Sponsored Enterprises (GSEs), corporate bonds Ch.6 V. Bond yield curves; entrepreneurship, time and ignorance New York Times, Lecture VI. LIBOR and variable rate debt instruments VII. Bond ratings, asymmetrical information, regulatory capture theory Ch. 2 VIII. Debt instrument cash flow analysis: “magic” of compound interest; simple loan, future value, present value; coupon bond; relationship between bond price and market interest rate Ch. 4 IX. Marxian “fictitious capital” and relationship to crisis; Mortgage-backed bonds as fictitious capital Lecture X. Fisher effects and negative interest rates; International Fisher effects and capital flows Ch. 4, Lecture I. PART III: I. II. III. IV. V. Banking and Bank Management Difference in Balance Sheets between banks and other corporations and rationale for bank regulation; timing mismatches and deposit insurance Ch. 10, Lecture Sources and uses of funds, liquidity and liability management Ch. 11 Risk management: default risk, systemic (policy) risk, risk risk premia; Ch. 10 Trade-offs between profits and capital adequacy; earnings Multiplier and leverage ratio Ch. 10 Liquidity management (cont.): borrowing at federal funds rate; management of investments; borrowing at discount rate; loan management Ch. 10 PART IV: Central Banking and Monetary Policy Historical development of US banking system; “dual banking System”, national and state banks Ch. 12, [Smith 1990], Fed Explained youtube II. Origination of Federal Reserve System; changes under Great Depression and Great Recession Ch. 12, Lecture, Selgin youtube I. Money and Banking - 2 III. “Systemic risk”, Basel Standards & mortgage-backed bonds revisited; “too big too fail” IV. Classical lendor of last resort theory vs. modern central banking V. Relationship between Keynesian fiscal policy, central banking monetary policy and the business cycle VI. Philips curve: price stability, the business cycle and unemployment VII. Dual vs. single mandate central banking VIII. Monetary policy tools I; Money supply, Federal Open Market Committee (FOMC) operations, reserve ratio, “pushing on a string”, Quantitative Easing IX. Monetary policy tools II; Fed Balance Sheet, discount loans/discount rate and monetary base X. Monetary policy tools III; Fed funds rate and relationship to interest paid on reserves Ch. 11 & 18, Lecture Lecture, [Bagehot 1873] Ch. 16, Lecture Ch. 19, Lecture Ch. 16, Lecture Ch. 16 & 18, youtube Ch. 17 &18 Ch. 17 & 18 PART V: Theories of Money and Crises I. History of financial crises II. Financial innovation, subprime bonds and moral hazard III. Austrian capital theory, time structures of production, entrepreneurial decision-making, interest-rates and risk premia Economist 2014 Ch. 9 Lecture, Higgs youtube [Prychitko 2010] Recommended Textbook: Frederic Mishkin (any edition). The Economics of Money, Banking and Financial Markets, by Mishkin. Pearson Addison-Wesley. Note that purchase of the textbook is not required, there is a copy on reserve in the campus library. In addition, students should stay current on topical financial events through reading The Economist magazine, the New York Times (especially the business section which is highly recommended), the Financial Times and/or the Wall Street Journal either in print or on-line versions. References: "The slumps that shaped modern finance", Economist magazine, April 2014, see link on Professor’s website. The following texts are optional reading for students seeking further knowledge of the subjects discussed and referenced in class. Walter Bagehot (1873). Lombard Street: A Description of the Money Market. http://www.gutenberg.org/ebooks/4359 Money and Banking - 3 Friedrich Hayek (1990). Denationalisation of Money: The Argument Refined https://mises.org/document/3970/Denationalisation-of-Money-The-Argument-Refined D.I. Prychitko (2010). Competing explanations of the Minsky moment: The financial instability hypothesis in light of Austrian theory”, see link on Professor’s website. George A. Selgin (1988). The Theory of Free Banking: Money Supply under Competitive Note Issue. [http://oll.libertyfund.org/index.php?option=com_staticxt&staticfile=show.php%3Ftitle= 2307&Itemid=27] Vera Smith (1990) [1936]. The Rationale of Central Banking and the Free Banking Alternative. http://www.econlib.org/library/LFBooks/SmithV/smvRCB.html Youtube videos as references: George Selgin, A Century of Failure: Why It's Time to Consider Replacing the Fed http://www.youtube.com/watch?v=yLynuQebyUM The Federal Reserve Explained http://www.youtube.com/watch?v=Oe0fGXzKb1o Quantitative Easing Explained http://www.youtube.com/watch?v=PTUY16CkS-k Quantitative Easing Revisited http://www.youtube.com/watch?v=oGIvw7T0GPI Robert Higgs, Regime Uncertainty Then and Now http://www.youtube.com/watch?v=f73izHRGI1A Keynes vs. Hayek, Fear the Boom and Bust, http://www.youtube.com/watch?v=d0nERTFo-Sk Keynes vs. Hayek, Fight of the Century, http://www.youtube.com/watch?v=GTQnarzmTOc The Real Reason Quaddafi was killed, http://www.youtube.com/watch?v=6O8vM06EEE Websites: The Fed’s report on current levels of M1 and M2 (the Federal Reserve reports money supply data at 4:30 p.m. every Thursday): http://www.federalreserve.gov/releases/h6/Current/ To access the Federal Reserve’s money museum: www.rich.frb.org/research/econed/museum/ Money and Banking - 4 Information on key interest rates: http://www.bloomberg.com/markets/rates/index.html The financial calculator for computing the current price of a discount bond: http://www.publicdebt.treas.gov/sav/savcalc.htm Historical information about inflation: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt To compute what goods would have cost at some point in the past after adjusting for inflation: http://mortgages.interest.com/content/calculators/index.asp To find the number of bank failure in the U.S., despite the regulations that protect banks from failure. (Select the tab labeled “Bank and Thrift Failures): http://www2.fdic.gov/hsob/ To view information on bank regulation: http://www.ny.frb.org/banking/regulations.html To find general information about the Federal Reserve System: http://www.federalreserve.gov/general.htm To find specific information on the FOMC, its schedule of meetings, statements, minutes, transcripts, members, and the “beige book”: http://www.federalreserve.gov/fomc/ To read the most recent annual report of the Federal Reserve: http://www.federalreserve.gov/boarddocs/rptcongress/ To review what the Federal Reserve reports as its primary purposes and functions: http://www.federalreserve.gov/pf/pf.htm Grading Policy: Grade Breakdown Supply & Demand Quiz Midterm Exam Group Project Class Participation Final Exam Total: 100% 10% 20% 20% 15% 35% Final A AB+ B BC+ C CD F Description Superior Excellent Accomplished Very Good Good Above Average Average Below Average Poor Failing Percent Conversion 95% - 100% 90% - 94% 87% - 89% 83% - 86% 80% - 82% 75% - 79% 70% - 74% 65% - 69% 60% - 64% Less than 60% Money and Banking - 5 Note Both the exams and the quiz will be as scheduled. There will be no “make-up” tests. If there is documented medical or family emergency we will re-weight the grading protocol. Class participation includes class attendance as well as active participation in class Q/As and discussion on current events. The only “extra credit” for an “extra work” that may be considered is to prepare a one page report after attending one of the events organized by the Economics Society at SFC. The report should be exclusively on the guest speaker’s lecture and should be analytical. Depending on the quality of submitted report, the “extra credit” could add up to 5% to the final grade percentage. There will be no recording of class sessions. Photographs of lecture materials is allowed, but only with advanced permission. Announcement If you have a documented disability requiring accommodation in this class, please see me at office hours or by appointments. Thank you. Class Calendar First day of class: September 3, 2014 Last day to drop/add without transcription notification: September 9 Last day for pass/fail transcript option: October 1 Quiz on Supply and Demand in the Loanable Funds Market (last 30 minutes of class), and, last day for voluntary group project sign-up: October 8 Final group assignments and Midterm Exam (last half of class): October 15 In-class review of Midterm exam: October 22 Midterm grades posted due-date: October 24 Last day to drop the class, with a “W” on transcript: November 5 Group presentations: November 19 and December 3 Thanksgiving break, no class: November 26 Extra-credit due: December 3 Final Exam: December 10 Final grades posted due-date: December 19 Money and Banking - 6