Money and Banking Professor Michael Hutchison Economics 130 Office: Room 473, E2 UCSC Office Phone: x92600 Winter 2009 Email: [email protected] Class Hours: T/Th 10-12noon Location: Soc Sci 1, Rm 110 Office Hours: 1-2pm Th and by appointment Syllabus This course is an upper division economics course in money, banking and financial markets. This is one of the most exciting areas in the study of economics, not least because the financial system is rapidly changing and is currently under severe stress associated with the sub-prime mortgage loan crisis. Concerns about the correct stance of monetary policy, aiming at keeping inflation low and maintaining financial stability, is at the heart of many economic policy debates. The course is divided into six parts: (1) overview of financial system; (2) fundamentals of interest rates and financial instruments; (3) financial markets and institutions; (4) central banking and monetary policy; (5) foreign exchange markets; (6) stabilization policy, money and inflation. The required text is Frederic Miskhin’s The Economics of Money, Banking and Financial Markets (8th Edition). In addition, a number of shorter articles will be assigned and posted to the class website (http://people.ucsc.edu/~hutch). These assignments will be announced in class. The reading assignments below only cover the textbook. The additional reading assignments on the website will cover recent developments in the current U.S. and world financial crisis, including the causes of the financial problems, U.S. Treasury attempts to recapitalize banks, new regulatory actions (and past failures), the Federal Reserve’s radical moves to provide liquidity to the financial system and act as a lender of last resort, and an outline of the new financial structure that is emerging. Requirements: Students will write one midterm (30% of grade), one final examination (50% of grade), and four short “surprise” quizzes (20% of grade; 5% for each quiz). Mr. Mahir Binici is the T.A. for the course. He will hold two weekly sections: Monday, 12:30-1:40pm (Oakes 106) and Wednesday, 2:00-3:10pm (Oakes 106). He is also available for special office hours by appointment. He may be reached at [email protected] and x95202. Important Dates Last Day of Class: Thursday, March 12 Date of Midterm: Tuesday, February 10 Date of Final Examination: Wednesday, March 18 (12-3pm)Class Schedule I. Introduction and Overview of the Financial System Week 1 Chapters 1-3 Tu Jan 6 Th Jan 8 II. Financial Markets Weeks 2-3 Chapters 4-7 Tu Jan 13 Th Jan 15 Tu Jan 20 Th Jan 22 III. Financial Institutions Weeks 4-5 Chapters 8-11 Tu Jan 27 Th Jan 29 Tu Feb 3 Th Feb 5 Midterm Examination: Tu Feb 10 IV. Central Banking and Monetary Policy Weeks 6-8 Chapters 12-16 Th Feb 12 Tu Feb 17 Th Feb 19 Tu Feb 24 V. Foreign Exchange Markets Weeks 8-9 Chapters 17-18 Th Feb 26 Tu Mar 3 VI. Monetary Theory and Evidence Weeks 9-10 Chapters 19, 22-24 Th Mar 5 Tu Mar 10 Th Mar 12 Final Examination: Wednesday, March 18,