Economics 353

Money, Banking and Financial Markets

 

Instructor:

Martin Ganco, B8B Curtiss, ganco@iastate.edu

Office hours: Tuesday, Thursday, 2:00 - 4:00 pm;

Term:

Summer 2005

Meeting time:

Monday - Friday: 12:10 – 1:10 pm

Classroom:

Heady 272

TA:

Jacob, Punnoose (Reuben), 294-4864, B2 Curtiss, pjacob@iastate.edu

 

COURSE DESCRIPTION

This course has the following primary objectives:

REQUIRED TEXTBOOK

The Economics of Money, Banking, and Financial Markets by Frederic Mishkin, 7th Edition, Addison Wesley, 2004. The course will cover chapters 1 – 20. The textbook is available for purchase at the University Bookstore. Additional reading materials will be posted on the course web site during the course.

COURSE WEBSITE

The course web site is: http://www.econ.iastate.edu/classes/econ353/ganco/index.htm

Problem sets, lecture slides and reading materials will be posted here. You are strongly encouraged to read the assigned reading materials, book chapters and lecture notes in advance.

SUPPLEMENTAL READINGS

You are also encouraged to become familiar with current issues in financial markets, as discussed in the financial press. Following are the relevant sources of financial information for our course:

I will also post additional articles. These will serve as a motivation for covered topics and may appear on the exams as bonus questions.

HOMEWORKS AND QUIZZES

There will be five problem sets handed out during the course. The problem sets will be similar to your exam questions. They will amount to 10% of your overall grade. Homework will be graded on a scale 0 - 10. The TA will be enforcing the deadlines and non-submission will automatically earn zero points. I will post the solutions to these problems on the class web site after their due date. You are encouraged to work on the problem sets together but you are required to submit your own answers and copying will not be tolerated.

The course web site will also contain links to practice quizzes. The publisher of the book provides these quizzes along with some additional materials as an online resource. Since the exam questions will have very similar structure, these practice problems will be indispensable in your preparation for the class.

GRADING

There will be three one-hour midterm exams during the semester and a final two-hour exam. The midterms will cover lectures, all the reading material and problem sets up to that date and the final exam will be comprehensive. The final grade will be based upon the following:

The corresponding letter grades will be based on the individual performance based on the overall score and will not be curved. Historically, the break up was as follows: 90 points A, 80 points B, 70 points C, 60 D. However, the actual break up might be different depending on the individual understanding of the key concepts of the course. There will be no make-up exams allowed for the midterm exams. You will need to take at least two midterms and the final exam to complete this course.

ADDITIONAL INFORMATION

Since this is an intense course and we will be progressing at a fast pace it is crucial for your success in the course to attend all lectures and prepare for each class by reading the relevant materials. I also recommend you to print out the lecture slides before each class and then use them when taking notes. I also prefer to have a dynamic class discussions elaborating and expanding the assigned readings rather than just me replicating the readings in the class. If you have additional questions I will be available during my office hours and by appointment. Feel free to e-mail me with questions and/or comments. I also encourage you to seek help from the TA.

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Course Outline

Part I: An Overview of Financial Markets and Institutions

  
June 13, 14 - Why Study Money, Banking, and Financial Markets? Chapter 1
June 14, 15 - Overview of the Financial System Chapter 2

June 16, 17- What is Money?

 Chapter 3
Part II: Investing
  
 June 20 - Discounting: How should one compare payments expected at different points in time?  Chapter 4
- June 24 - Portfolio Choice: How should one select an asset under uncertainty?  Handout
  June 27 - MIDTERM EXAM I (Chapters. 1-4, Notes on Portfolio Choice)  
Part III: Financial Markets
  

June 28 - What determines the overall level of interest rates?

 Chapter 5

- July 1 - 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?

  Chapter 6
July 5 - What drives the movement of stock prices over time?  Chapter 7
- July 8 - The Foreign Exchange Market and the International Financial System  Chapter 19, 20
July 11, 12- Financial Derivatives: What are futures, options and why are they useful?  Chapter 13
July 13 - MIDTERM EXAM II (Chapters 5 - 7, 19, and 20)  

Part IV: Financial Institutions

  
July 14 - The role of asymmetric information in financial intermediation Chapter 8
July 15 - Commercial Banking: What are the main activities of bank managers? Chapter 9  
July 18 - Structure, Competition and Regulation in Banking: Main developments and current trends Chapter 10,11  
- July 20 - Non-Bank Financial Institutions Chapter 12
Part V: Central Banking and the Conduct of Monetary Policy
  
- July 22 - Structure of Central Banks and the Federal Reserve System Chapter 14
July 25 - MIDTERM EXAM III (Ch 8 – 14)
July 26, 27 - Multiple Deposit Creation Chapter 15
July 28, 29 - Determinants of Money Supply, Final Exam Review Chapter 16
August 1, 2 - Monetary Policy: · What options to control money supply are available to the Fed? Chapter 17
August 3 - How is monetary policy conducted in practice?  Chapter 18
August 4 - COMPREHENSIVE FINAL EXAM: Material covered throughout the semester