BAEcon Economics and Finance

The aim of this course is to introduce students to the way that banks, financial markets and monetary policy work and interact in theory and practice. We examine how bond and money markets operate and how interest rates behave. We also look into some of the problems and dilemmas that central banks face in choosing appropriate policies and implementing them, both in normal times and during financial crises. Throughout the course examples from financial newspapers and other sources are used to familiarise students with how theoretical concepts are used in practice.

At the end of this course students should be able to: (a) understand how interest rates behave in the bonds and money markets; (b) demonstrate their understanding of the term structure of interest rates; (c) understand the theories of the demand for money and their implications; (d) understand how the supply of money is created within the banking system; (e) understand how central banks conduct monetary policy; (f) demonstrate their knowledge on the various tools, targets and goals employed in monetary policy and understand their limitations. 

(ECON20031 OR ECON30031 OR ECON20521 OR ECON30521) AND (ECON10071A OR ECON10071B OR ECON20071) AND (ECON10072A OR ECON10072B OR ECON20072)

(ECON20031  OR ECON30031 OR ECON20521 OR ECON30521 ) AND (ECON10071 OR ECON20071 ) AND (ECON10072  OR ECON20072 )

These are all strict pre-requisities.

The aim of this course is to introduce students to the way that banks, financial markets and monetary policy work and interact in theory and practice. We examine how bond and money markets operate and how interest rates behave. We also look into some of the problems and dilemmas that central banks face in choosing appropriate policies and implementing them, both in normal times and during financial crises. Throughout the course examples from financial newspapers and other sources are used to familiarise students with how theoretical concepts are used in practice.

At the end of this course, you should be able to:

1. Understand how interest rates behave in the bonds and money markets.
2. Demonstrate their understanding of the term structure of interest rates.
3. Understand the theories of the demand for money and their implications.
4. Understand how the supply of money is created within the banking system.
5. Understand how central banks conduct monetary policy.
6. Demonstrate their knowledge on the various tools, targets and goals employed in monetary policy and understand their limitations.

Provisional

• The Financial Markets and Interest Rates.
• The Term Structure of Interest Rates.
• The Demand for Money.
• The Supply of Money and the Banking System.
• Central Bank Tools of Monetary Policy.
• Goals and Targets of Monetary Policy.
• Monetary Targets Vs Interest Targets.
• Policy Targets in Practice.
• The Taylor Rule. Inflation Targeting.
• The 2007 Financial.

Synchronous activities (such as Lectures or Review and Q&A sessions, and tutorials), and guided self-study

75% Exam

25%  Assessed Coursework (500 words)

• Feedback provided on submitted assignments.
• Class feedback.
• Office hours.
• Revision sessions.
• Support hours.   

Main Textbooks:

• Frederic S. Mishkin, The Economics of Money, Banking, and Financial Markets, 10th Edition, Pearson.
• Cecchetti  and Schoenholtz  3rd  Ed “Money, Banking, and Financial Markets”.
   

For every 10 course unit credits we expect students to work for around 100 hours. This time generally includes any contact times (online or face to face, recorded and live), but also independent study, work for coursework, and group work. This amount is only a guidance and individual study time will vary.