| 1 | see above1. Money, an Introduction: the functions of money; commodity monies, commodity standards and fiat moneys; liquidity, monetary aggregates; payment technologies and definitions of money. The key issues of credibility and verifiability. |
| 2 | 2. Financial markets, instruments and institutions. The main economic function of financial markets; primary and secondary markets for financial instruments; money markets versus capital markets; the main types of financial instruments; financial intermediaries; the main types of financial institutions. The key issues of credibility, verifiability, openness, fungabiluty and transparency. |
| 3 | 3. Interest rates. Computing different interest yields; risk and market interest rates; market interest rates and different terms to maturity; the real interest rate; relating interest yields on bonds issued in different countries; key interest indicators of financial market conditions; interest rates in the financial system; relationship between interest rates and security prices; inflation, yield curves and duration; default risk, taxes and other factors affecting interest rates. |
| 4 | 4. Financial instruments. Key financial instruments of the money and capital markets; interest rate risk; duration; derivative securities; the most commonly traded derivative securities; foreign exchange instruments. |
| 5 | 5. Financial Institutions. Security market institutions; insurance companies; pension funds; finance companies; mutual funds; overlapping functions of financial institutions. |
| 6 | 6. Depository Financial Institutions. The historical origins of modern banking institutions; why depository institutions are segmented; the key assets of commercial banks; the key liabilities of commercial banks; how savings institutions differ from commercial banks; how credit unions raise and allocate their funds. |
| 7 | 7. The Economics of Depository Institutions. Key sources of depository institution reserves; key sources of depository institution costs; common measures of depository institution profitability; the main determinant of a depository institution’s profitability; the evolution of the philosophy of depository institution management; recent performance of depository institutions. |
| 8 | 8. Foundations of Depository Institutions Regulation. The goals of depository institution regulation; deposit insurance as a justification for federal Regulation; the reasons that bank holding companies exist; how deposit interest rate ceilings spurred innovation and regulation; the current bank capital requirements; the causes of massive savings institutions failures of the 1980s and 1990s; how the FDIC decides how much to charge for deposit insurance. |
| 9 | 9. Issues in Depository Institution Regulation. The arrival of interstate banking; the likely effects of interstate banking; universal banking; the pros and cons of universal banking; regulatory complications arising from off-balance sheet banking; the costs and benefits of depository institution consumer protection laws. |
| 10 | 10. Depository Institutions and Money. The distribution of the cash reserves of DIs; how a change in total DI Reserves causes a multiple expansion effect on their deposits; Federal Reserve Open market Operations; the Money Multiplier and Its Importance; Factors that Influence the Money Multiplier; The Credit Multiplier. |
| 11 | 11. Central Banking and the Fed. The First American Central Banking Institutions; Responsibilities for Monetary and Banking Policies without a central bank in 19th and 20th century USA; the motivation for Congress to Establish the Federal Reserve System; The rationale for the 1935 Congressional Restructuring of the Federal Reserve; those who make the key policy decisions at the Federal Reserve; the Power of the Chair of the Fed’s Board of Governors. |
| 12 | 12. The Fed, the Financial System and Monetary Policy. The Main Assets and Liabilities of the Fed; Ways in which the Fed is the Government’s Bank; the rationale for the Fed’s Role as a bank for Private Banks; the reason the Fed plays a Supervisory Role in the US Payments System; daylight Overdrafts and the Fed’s concerns about them; the primary tools through which the Fed conducts monetary policy. |
| 13 | 13. Monetary Policy Implementation and Fed Operating Procedures. Key factors that influence the demand for reserves by Depository Institutions; How federal reserve policies determine the supply of reserves to DIs and the Federal Funds Rate; the linkage between the FFR and other market interest rates; the main determinants of the total demand for money by consumers and businesses; how Federal Reserve Policies Affect the Quantity of Money; Types of Federal Reserve Operating Procedures. |
| 14 | 14. The Essentials of Monetary Theory. Real versus nominal national income; the equation of exchange; how monetary policy affects prices, real output and employment according to Classical Monetary Theory; how gradual price adjustment alters classical predictions about how monetary policy actions can influence the price level, real output and employment; the difference between adaptive and rational expectations; how modern monetary theories differ in their predictions about how monetary policy af |
| 15 | 15. The Fed and the American Economy. The Fed’s ultimate monetary policy goals; monetary policy time lags; why the Fed might use an intermediate monetary policy target; why central bank credibility is important for maintaining low inflation; how the credibility of central banks such as the Fed might be enhanced; the independence of central banks such as the Fed. |
| 16 | 16. The Fed and the World Economy. Why individuals and businesses hold financial instruments issued in other denominations; ways in which world financial markets have become more interconnected; how economists measure international transactions; how exchange rates are determined; fixed versus flexible exchange rates; the Fed’s role in foreign exchange markets. |
| 17 | (Please note, as this is a semester long course, it does not run for the entire year. The above notes are indicative of waht will be covered during the semester. |
