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Syllabus The Ec o nomics of Money and Banking Instructor: office: phone: office hrs: ~<zrn, "1';17~007 Dan Zuchegno Econ. 309 492-6875 Mon. 3:00 - 4:00 Wed. 11:00 - 12 :00, 1:00-2:00 Textbooks: required: Money, Banking and the Financial System, E.V. Bowden, 1989, West Publishing Co. A Random Walk Down Wall Street, Burton G. Malkiel, 4th. ed., Norton Publishing Co. optional: Study Guide to Monev, Banking and the Financial System, E.V. Bowden and Judith Holbert Bowden. The Wall Street Journal. With regard to domestic and international banking and monetary issues the Wall Street Journal maintains one of the most current and educational series of writings available. I will occasionally take articles and examples out of the Journal for discussion. Grading: There will be three exams in this course, two midterm exams and a final exam each approximately five weeks apart. Each exam will consist of part multiple choice, part problems, and part essay and will account for approximately one-third of the total course grade. THE course can be broken down into several sections. Section I is an introduction to money and financial markets. This includes an overview regarding the definition and role of money in an economy and a description of the financial market system in the United States. Included is a discussion of the determination of interest rates, their levels and structure. Section II pertains to the structure of the domestic banking system and the process of money creation. Section III discusses the policy tools through which the United States monetary authorities can affect the domestic money supply. Section IV is a detailed macroeconomic study of the relationship between money and economic activity. Section vis a basic introduction into the relationship between international financial flows and domestic financial and banking mark e ts. Assignments Section I. Introduction to Money Introduction, What is Money & Money Demand; Malkiel, chpt. 1-2 Interest Rates and Yields; chpt. 3(B) Money Demand and Velocity; chpt. 4,5(B) chpt. 1,2) Section II . Financial Intermediation and Financial Markets Malkiel, chpt. 3-9 Financial Intermediation; chpt. lO{B) Real and Financial Assets, Functions of Financial Instruments Markets; chpt. ll(B) Appendix. lla. {B) Capital and Money Markets; chpt. 12{B) The Risk & Term Structure of Interest Rates; chpt.13(B) Section III . Banking & the Banking System Malkiel, chpt. 11 The Banking Industry; chpt. 6(B) Thrift Institutions; chpt. 7(B) Financial Innovation & Regulation; the 1980's; Structure of the Federal Reserve; chpt. 9{B) & chpt. 8(B) Section IV. Money Creation and the Money Supply Process Introduction, Bank Balance Sheets; chpt. 18(B) High Powered Money & Money Multipliers; chpt. 19(B) Tools of Monetary Policy; chpt. 20(B) Bank Reserves and the Monetary Base; chpt. 21(B) Determinants of the Money Supply and the Monetary Base; chpt. 22(B) Section V. Monetary Theory and Policy Goals and Targets of The Federal Reserve; chpt. 23(B) The Federal Reserve's Monetary Targets; chpt. 24(B) Money, Output, and Prices: Keynesian and Monetarist Views; chpt . 25(B) Section VI. Monetary Theory: Basic Models Classical and Monetarist Models; chpt. 27(B) The Keynesian Framework; chpt. 28(B) The ISLM Model; chpt. 29,3l(B) Chapter 30 is optional . Aggregate Demand and Aggregate Supply; chpt 32,33(8) Keynesian and Monetarist Views of AgD-AgS; chpt. 34(B) Section VII. International Economics & Banking Activity Foreign Exchange Markets; chpt. 37(B) International Financial System; chpt. 38(8)