MONEY AND BANKING

This course focuses on money and banks. The course consists of three related parts. Part 1 addresses the fundamentals of money, credit and banking (domestic and international). Part 2 explores issues in monetary theory focusing on money supply, money demand and the relationship between money, credit and economic activity. Part 3 focuses on monetary policy, paying particular attention to the European Central Bank. The course combines a traditional academic approach with an emphasis on case studies and the analysis of monetary and financial data.

Microeconomics, Macroeconomics.

Knowledge and understanding: The course will offer key theoretical tools to understand the fundamentals of money, banking and monetary policy from a theoretical and applied perspective. This course provides advanced knowledge and analytical resources that will enable students to understand the role that money and banks play in a market-based advanced economy, bringing together notions from economic theory and policy, economic history and the history of economic thought. Applying knowledge and understanding: The students will be able to: 1) apply baseline macroeconomic models of money and banking to case studies of monetary policymaking; 2) examine major current issues in the field of money, banking and monetary policy. 3) understand the linkages between banks and the central bank on the money market. 4) look at how monetary institutions shape, constrain and enable policymaking, and in particular monetary policy and banking regulation. 5) understand how monetary policy affects the economy through the monetary transmission process. Making judgements: We expect students to be able to analyze baseline monetary models and demonstrate a critical understanding of the role that money, banks and the central bank play in market-based advanced economies. Students are expected to be able to discuss and evaluate how central banks in general and the ECB in particular take their policy initiatives and implement them. Throughout the whole course, students will be invited to critically analyze when, how and why certain monetary policies are pursued and what their likely effects are going to be. Communications Skills: This course will give the students, - by participating in the lectures and the other activities of the course - the possibility to acquire and understand major terms and concepts in order to communicate their ideas, proposals, analysis and critical reasoning in the field of monetary economics, banking, monetary policy in an effective and appropriate way. They will also be able to write short essays about these topics based on reference to the relevant sources. The evaluation of the acquired knowledge will be carried out through an intermediate written test and a final oral test. Learning skills: This course will contribute to empower learners giving them the tools to determine why certain monetary policies are followed and others are not and to evaluate explanatory the models in an independent way.

1) Fundamentals of money: views on money, functions of money, types of money, monetary aggregates 2) Fundamentals of credit: the relationship between debtor and creditor, the debt contract, credit risk 3) Interest rates in nominal and real terms, yield curve 4) Fundamentals of Banking: banking activities, types of banks, bank balance sheet, banking risks and regulation, shadow banks, investment banks 5) The central bank and its functions 6) The money market as part of the financial system 7) Monetary theory (Part I): The quantity theory of money 8) Monetary theory (Part II): The money multiplier and bank deposit creation 9) Monetary theory (Part III): Keynes on money and the theory of liquidity preference 10) Money, banks and the economy: the IS-LM model, the CC-LM Model, IS-MP-IA model 10) Monetary policy fundamentals: goals, instruments, stance, strategy. 11) European Central Bank: strategy and instruments 12)The monetary policy transmission mechanism. 13) Current issues in money and banking

Mandatory reference Lectures slides (course website) European Central Bank, (2011) The Monetary Policy of the ECB, 3rd edition, ECB Additional reference for students who do not attend the classes. Mishkin, F. (2012) The Economics of Money, Banking and Financial Markets, 10th edition, Pearson Education De Haan J. Et al (2015) Financial Markets and Institutions. A European Perspective. 3° edition. CUP Other reference Handa J. (2009) Monetary Economics, 2nd edition, Routledge Valdez S., and Molyneux P. (2010) An Introduction to Global Financial Markets, 6th edition, Palgrave MacMillan ECB annual and monthly bulletins, BIS publications, Quality financial press (the Economist, the Financial Times) At the beginning of each week, the instructor will indicate the reading material covering the lectures of the week.

Lectures

Compulsory written examination. For those who only take the final written examination, the evaluation method consists of the final examination (written examination (compulsory), 90%) + an evaluation of participation in the course (10%). Students may also choose to take an intermediate (non-compulsory) written test on the first part of the programme. In this case, the assessment method consists of an intermediate test (written test only, 45%) and a final test (written test (compulsory), 45%) + an assessment of participation in the course (10%). The mid-term test and the final examination consist of open questions (i.e. the questions are not multiple-choice) The following assessment criteria will be taken into account when awarding the final grade in thirtieths: knowledge and understanding of the course content (60% of the final grade); ability to independently apply the comparative approach used during the course (30% of the final grade); active participation in the lessons (10% of the final grade).

Regular class attendance, pass, no minimum grade is required.