Money and Banking Professor Michael Hutchison Economics 130 Office: Room 473, E2 UCSC Office Phone: x92600 Winter 2011 Email: [email protected] Class Hours T/Th 12-1:45pm Location Kresge 327 Office Hours: 3:30-4:30 T/Th 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 still recovering from 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 or 9th 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 U.S. and world financial systems, including the causes of the recent financial crisis, bank restructuring, 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 comprehensive final examination (55% of grade), and three short “surprise” quizzes (15% of grade; 5% for each quiz; 4 quizzes given but only 3 quizzes counted; lowest quiz score dropped). No make-up exams for missed midterm, final or quizzes. Mr. Vlad Sushko is the T.A. for the course. He will hold two weekly review sections (Monday, 11am-12:10pm, and Wednesday, 7-8:10pm, starting the week of January 17th, both in Engineering 2, Room 194), and one office hour per week (Mondays 12:30 - 1:30 pm, Room: Engineering 2, Room 403G). He is also available for special office hours by appointment (Room: Engineering 2, Room 493). He may be reached at [email protected]. Important Dates First Day of Class: Tuesday, January 4 Last Day of Class: Thursday, March 10 Date of Midterm: Tuesday, February 8 Date of Final Examination: Wednesday, March 16 (4-7pm)Class Schedule I. Introduction and Overview of the Financial System Week 1 Chapters 1-3 Editions 8 and 9 Tu Jan 4 Th Jan 6 II. Financial Markets Weeks 2-3 Chapters 4-7 Editions 8 and 9 Tu Jan 11 Th Jan 13 Tu Jan 18 Th Jan 20 III. Financial Institutions Weeks 4-5 Chps 8-11 Edition 8 (plus handout on Fin. Crisis); Chps 8-12 Edition 9 Tu Jan 25 Th Jan 27 Tu Feb 1 Th Feb 3 Midterm Examination: Tuesday, February 8 IV. Central Banking and Monetary Policy Weeks 6-8 Chapters 12-16 Edition 8; Chapters 13-16 Edition 9; Th Feb 10 Tu Feb 15 Th Feb 17 Tu Feb 22 V. Foreign Exchange Markets Weeks 8-9 Chapters 17-18 Editions 8 and 9; Th Feb 24 Tu Mar 1 VI. Monetary Theory and Evidence Weeks 9-10 Chapters 19, 22-24 Editions 8 and 9; Th Mar 3 Tu Mar 8 Th Mar 10 Final Examination: Wednesday, March 16