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You are here:Open notes-->Iowa-State-->Money-Banking-and-Financial-Markets-econ657

Money, Banking, and Financial Markets econ657

How to study this subject

COURSE OBJECTIVES 

This course has two objectives. The first is to provide an overview of the US financial system. Second, the course will enable you to understand the functions of various markets and institutions that constitute a financial system. Along the way, we will consider the decision problems faced by investors, financial intermediaries, and the central bank and analyze how these players interact to determine allocation of funds, asset prices, and interest rates.


TEXTBOOK 

The required textbook is The Economics of Money, Banking, and Financial Markets by Frederic Mishkin, 7th Edition, Addison Wesley, 2004. The course will cover chapters 1 20.


CLASS MATERIAL ONLINE

Lecture slides used in class meetings will be available on the class website (http://www.econ.iastate.edu/classes/econ353/rksingh) in advance.

Since one of the main objectives of the course is to cultivate the ability to think analytically about financial markets and institutions, students are strongly encouraged to become familiar with current issues in financial markets, as discussed in the financial press. The Economist (a weekly) provides an excellent coverage and discussion of current economic and financial events. Some of the articles published weekly in the Economist are freely available at the Economist's home page (http://www.economist.com). Daily coverage can be found in Financial Times and the Wall Street Journal.

On the course website I will post a list of newspaper/magazine articles relevant to the class. I will regularly recommend articles for you to read as a motivation for upcoming or past course topics. Each exam will have bonus question/s on star-marked readings.


PROBLEM SETS/QUIZZES

During the term, 5 problem sets will be handed out. These problem sets will help you learn the material presented in the class and in the text, and help you practice for the exams. Problem sets will be worth 10% or your grades. The problem sets will be graded on a good (G), satisfactory (S), and unsatisfactory (U) basis, which will be worth 2, 1, and 0 points, respectively. Non-submission will automatically earn a 0. The solutions to these problems will be posted on the class website after their due date.


OFFICE HOURS

Office hours are on Tuesdays, 9:25 am -10:55 am, Thursdays, 9:25 am -10:55 am, or by appointment. Please also feel free to e-mail me with questions and/or comments. I strongly encourage students to take advantage of office hours.


EXAMS/GRADING

There will be three (hour-long) midterm exams (no make-ups) during the semester, plus a final exam. The midterms will cover lectures, all the reading material, and problem sets (see course outline). The final exam will be comprehensive. The final grade will be based upon the following

  • Three midterms (best 2 out of 3): 27.5 percent each
  • Comprehensive final: 35 percent

The letter grades will be based on the individuals mastery of the course material, as displayed by each students overall course score, and not on a curve. The exact cut-offs for letter grades will be announced after the second midterm.

 


 

OUTLINE OF COURSE TOPICS

 

A tentative topic-wise calendar of lectures is as follows

 

 

Date

Topic

Chapters

Part I: An Overview of Financial Markets and Institutions

1/10

Why Study Money, Banking, and Financial Markets?

Ch 1

1/12 1/17

Overview of the Financial System

Ch 2

1/19

What is Money?

Ch 3

Part II: Investing

1/24 -

Discounting: How should one compare payments expected at different points in time?

Ch 4

- 2/2

Portfolio Choice: How should one select an asset under uncertainty?

Handout

2/7

HOUR EXAM I  Chs. 1-4, Notes on Portfolio Choice

Part III: Financial Markets

2/9

What determines the overall level of interest rates?

Ch 5

-2/16

The Risk and Term Structure of Interest Rates:

        What determines the spread between corporate, municipal and Treasury bonds?

        What determines the spread between government bond yields of different maturities?

Ch 6

2/21

What drives the movement of stock prices over time?

Ch 7

2/23 3/2

The Foreign Exchange Market and the International Financial System

Chs 19, 20

3/7

Financial Derivatives: What are futures, options and why are they useful?

Ch 13

3/9

MIDTERM EXAM II - Chs 5 - 7, 13, 19,  and 20

 

Spring Break: March 13 -17

Part IV: Financial Institutions

3/21

The role of asymmetric information in financial intermediation

Ch 8

3/23

Commercial Banking: What are the main activities of bank managers?

Ch 9

3/28 4/6

Structure, Competition and Regulation in Banking: Main developments and current trends

Chs 10, 11

4/11

Non-Bank Financial Institutions

Ch 12

4/13                                          HOUR EXAM III - Chs 8 12

Part V: Central Banking and the Conduct of Monetary Policy

4/18

Structure of Central Banks and the Federal Reserve System

Ch 14

4/20

Multiple Deposit Creation

4/25

Determinants of Money Supply

Ch 15

4/27

Monetary Policy

        What options to control money supply are available to the Fed?

        How is monetary policy conducted in practice?

Ch 16

4/27

Final Exam Review

 

5/2 (tentative)

7:30-9:30 am

COMPREHENSIVE FINAL EXAM: Chs 15-18; Plus all the material covered before

Section 2

COURSE OBJECTIVES 

This course has two objectives. The first is to provide an overview of the US financial system. Second, the course will enable you to understand the functions of various markets and institutions that constitute a financial system. Along the way, we will consider the decision problems faced by investors, financial intermediaries, and the central bank and analyze how these players interact to determine allocation of funds, asset prices, and interest rates.


TEXTBOOK 

The required textbook is The Economics of Money, Banking, and Financial Markets by Frederic Mishkin, 7th Edition, Addison Wesley, 2004. The course will cover chapters 1 20.


CLASS MATERIAL ONLINE

Lecture slides used in class meetings will be available on the class website (http://www.econ.iastate.edu/classes/econ353/rksingh) in advance.

Since one of the main objectives of the course is to cultivate the ability to think analytically about financial markets and institutions, students are strongly encouraged to become familiar with current issues in financial markets, as discussed in the financial press. The Economist (a weekly) provides an excellent coverage and discussion of current economic and financial events. Some of the articles published weekly in the Economist are freely available at the Economist's home page (http://www.economist.com). Daily coverage can be found in Financial Times and the Wall Street Journal.

On the course website I will post a list of newspaper/magazine articles relevant to the class. I will regularly recommend articles for you to read as a motivation for upcoming or past course topics. Each exam will have bonus question/s on star-marked readings.


PROBLEM SETS/QUIZZES

During the term, 5 problem sets will be handed out. These problem sets will help you learn the material presented in the class and in the text, and help you practice for the exams. Problem sets will be worth 10% or your grades. The problem sets will be graded on a good (G), satisfactory (S), and unsatisfactory (U) basis, which will be worth 2, 1, and 0 points, respectively. Non-submission will automatically earn a 0. The solutions to these problems will be posted on the class website after their due date.


OFFICE HOURS

Office hours are on Tuesdays, 9:25 am -10:55 am, Thursdays, 9:25 am -10:55 am, or by appointment. Please also feel free to e-mail me with questions and/or comments. I strongly encourage students to take advantage of office hours.


EXAMS/GRADING

There will be three (hour-long) midterm exams (no make-ups) during the semester, plus a final exam. The Hour exams will cover lectures, all the reading material, and problem sets (see course outline). The final exam will be comprehensive. The final grade will be based upon the following

  • Hour exams (best 2 out of 3): 27.5 percent each
  • Comprehensive final: 35 percent

The letter grades will be based on the individuals mastery of the course material, as displayed by each students overall course score, and not on a curve. The exact cut-offs for letter grades will be announced after the second midterm.

 


 

OUTLINE OF COURSE TOPICS

 

A tentative topic-wise calendar of lectures is as follows

 

 

Date

Topic

Chapters

Part I: An Overview of Financial Markets and Institutions

1/11

Why Study Money, Banking, and Financial Markets?

Ch 1

1/13 1/18

Overview of the Financial System

Ch 2

1/20

What is Money?

Ch 3

Part II: Investing

1/25 -

Discounting: How should one compare payments expected at different points in time?

Ch 4

- 2/3

Portfolio Choice: How should one select an asset under uncertainty?

Handout

2/8

HOUR EXAM I  Chs. 1-4, Notes on Portfolio Choice

Part III: Financial Markets

2/10

What determines the overall level of interest rates?

Ch 5

-2/17

The Risk and Term Structure of Interest Rates:

        What determines the spread between corporate, municipal and Treasury bonds?

        What determines the spread between government bond yields of different maturities?

Ch 6

2/22

What drives the movement of stock prices over time?

Ch 7

2/24 3/3

The Foreign Exchange Market and the International Financial System

Chs 19, 20

3/8

Financial Derivatives: What are futures, options and why are they useful?

Ch 13

3/10

MIDTERM EXAM II - Chs 5 - 7, 13, 19,  and 20

 

Spring Break: March 14 -18

Part IV: Financial Institutions

3/22

The role of asymmetric information in financial intermediation

Ch 8

3/24

Commercial Banking: What are the main activities of bank managers?

Ch 9

3/29 3/31

Structure, Competition and Regulation in Banking: Main developments and current trends

Chs 10, 11

4/5

Non-Bank Financial Institutions

Ch 12

Part V: Central Banking and the Conduct of Monetary Policy

4/7

Structure of Central Banks and the Federal Reserve System

Ch 14

4/12

HOUR EXAM III - Chs 8 12, and 14

4/14

Multiple Deposit Creation

Ch 15

4/19

Determinants of Money Supply

Ch 16

4/21 4/26

Monetary Policy

        What options to control money supply are available to the Fed?

        How is monetary policy conducted in practice?

Chs 17,18

4/28

Final Exam Review

 

5/3

9:45-11:45 am

COMPREHENSIVE FINAL EXAM: Chs 15-18; Plus all the material covered before

 



Official Notes


  Lecture Slides

 

*      Lecture 1

*      Lectures 2 and 3

*      Lecture 4

*      Lecture 5 and 6

*      Lecture 7 and 8

 

 


 

  Practice Quizzes

 

*      Lecture 1 (Chapter 1) (all except 7 and 8 would not hurt if you do them as well!)

*      Lectures 2 and 3 (Chapter 2) (all)

*      Lecture 4 (Chapter 3) (except 13, 14)

*      Lecture 5 through 8 (Chapter 4) (except 8, 15)



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