ECON 215 -- Money, Credit, and Banking

Fall 2008

 

Instructor: Osman Suliman

Office: Room 331 McComsey

Phone: Ext. 3558/3679

E-mail: osman.suliman@millersville.edu

Office Hours: MWF 9:00 - 10:00 AM, MW 3:30 – 4:30 PM, or by appointment

 

TEXT: Mishkin, Frederick.  The Economics of Money, Banking, and Financial Markets, 8th ed. (updated) Boston:  Addison Wesley, 2008.

 

Take advantage of practice quizzes in myeconlab.

 

INTRODUCTION AND OBJECTIVES: This course is intended to emphasize the underlying economic explanations for why the financial system is organized as it is and to show students how the financial system and the economy are interconnected. Hopefully, with this approach, the student learns a paradigm for interpreting events, not a list of facts that quickly become outdated.

 

Money and the financial system are essential components in trade and in bringing together savers and borrowers. Understanding the workings of financial markets and financial institutions within the financial system will help you interpret current events, predict future developments and make more informed decisions as a consumer, saver, borrower, or business manager.

 

In this course we should learn about:

1. The role of money in the economy

2. How to calculate interest rates

3. The role and structure of financial markets.

 

The Economics Department outcomes related to this course are:

 

A. A thorough and complete understanding of the role of markets, market forces, and government policy in our open macroeconomy.

1. Be able to identify and explain the fundamental concepts of the macroeconomy such as output, inflation, and unemployment.

2. Be able to critically analyze, explain, and model fluctuations in the macroeconomy.

3. Be able to critically analyze, explain, and model the impact of fiscal and monetary government policies in the macroeconomy.

4. Be able to apply macroeconomic theory to understand historical and current events in the macroeconomy.

 

B. Exposure to the open economy (e.g. in the international context). The ability to recognize, explain, and apply in a real-world context and critique:

1. fundamental theories and concepts of international trade such as comparative advantage and protectionism

2. various economic institutions of the open economy

3. fundamental theories and concepts associated with economic development

 

C. Exposure to various perspectives within economic thought: The ability to recognize, explain, and apply in a real-world context and critique:

1. economic paradigms such as capitalism and market analysis, socialism, institutionalism, and feminist economics

2. various economic institutions and systems

3. economic theories derived from various economic paradigms and systems

4. the historical basis for economic paradigms, systems, theories, and institutions.

 

REQUIREMENTS:

3 exams

3 problem sets

 

Attendance is required.  Only documented excused absences are allowed.  More than three unexcused absences will decrease your final grade by half a letter grade.

 

Total possible points will be distributed as follows:

 

3 Exams -- 100 points each                 300

3 Problem Sets                                      90

Class Participation                                 10

Total Possible Points                           400

 

GRADING SYSTEM:

 

360-400       (90%) A

352-359       (88%) A-

340-351       (85%) B+

320-339       (80%) B

308-319       (77%) B-

280-307       (70%) C+

260-279       (65%) C

240-259       (60%) C-

220-239       (55%) D+

200-219       (50%) D

192-199       (48%) D-

0-191         F

 

RECOMMENDED: Common sense ideas for more understanding of the theoretical analyses to be developed in this course can be gained by reading some of the economics--business-oriented magazines and watching relevant TV programs. Examples are:

1. The Wall Street Journal

2. The Economist

3. Fortune

4. Challenge

5. U.S. News and World Report

6. Business Week

7. "Wall Street Week": Public TV, Friday Evening

8. "Adam Smith World": Public TV, Sunday Afternoon

9. "The Nightly Business Report": Public TV

10. "CNN Business Report" and "Money Line": 6:30 PM and 11:00 PM everyday

 

TENTATIVE EXAM SCHEDULE:

 

Exam #1  September 29

Exam #2  November 10

Final    final exam schedule

 

PROBLEM SET SCHEDULE:

 

Problem Set #1 due September 19

Problem Set #2 due October 31

Problem Set #3 due November 26

Note:  5 points will be deducted for each day late (including weekends).

 

 

TENTATIVE COURSE OUTLINE:

 

Introduction

Ch. 1 Why Study Money, Banking, and Financial Markets?

Ch. 2 An Overview of the Financial System

Ch. 3 What is Money?

 

Financial Markets

Ch. 4 Understanding Interest Rates

Ch. 5 The Behavior of Interest Rates

Ch. 6 The Risk and Term Structure of Interest Rates

Ch. 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

 

Financial Institutions

Ch. 8 An Economic Analysis of Financial Structure

Ch. 9 Banking and the Management of Financial Institutions

Ch. 10 Banking Industry:  Structure and Competition

Ch. 11 Economic Analysis of Banking Regulation

 

Central Banking and the Conduct of Monetary Policy

Ch. 12 Structure of Central Banks and the Federal Reserve System

Ch. 13 Multiple Deposit Creation and the Money Supply Process

Ch. 14 Determinants of the Money Supply

Ch. 15 Tools of Monetary Policy

Ch. 16 What Should Central Banks Do?  Monetary Policy Goals, Strategy, and Tactics

 

International Finance and Monetary Policy

Ch. 17 The Foreign Exchange Market

Ch. 18 The International Financial System

 

Monetary Theory

Ch. 19 The Demand for Money

Ch. 20 The ISLM Model

Ch. 21 Monetary and Fiscal Policy in the ISLM Model

Ch. 22 Aggregate Demand and Supply Analysis

Ch. 23 Transmission Mechanisms of Monetary Policy:  The Evidence

Ch. 24 Money and Inflation

Ch. 25 Rational Expectations:  Implications for Policy