ECON-332: Money, Banking, and Finance in
the Global Economy
Prof. Martha Starr
Department of Economics
American University
Fall 2007
Telephone:
(202) 885-3747
Office: Roper
Hall 201
Office hours: Tuesdays 3:00-6:00
pm, Fridays 11:15-2:15 pm
Email:
mstarr@american.edu
Please put “econ-332 money” in the subject
line
Class website:
AU blackboard
“[S]o much barbarism … still remains in
the transactions of most civilized nations, that almost all independent
countries choose to assert their nationality by having, to their own
inconvenience and that of their neighbors, a peculiar currency of their own.”
-- J.S. Mill, Principles of
Political Economy, Book III, Chap. 10 (1848)
Course description
This
class covers the economics of money, banking and capital markets in a
globalizing world. Instead of the U.S.-oriented, “closed economy” approach
taken in traditional money and banking classes, this class takes a
globally-oriented, “open economy” approach better suited to present-day
realities of money, banking, and capital markets.
Required
readings
·
The
text for the class is Frederic Mishkin, The Economics of Money, Banking, and Financial Markets, 8th edition,
2007.
·
The Economist. Instructions
for signing up for a 12-week subscription are given on the last page of this
hand-out. Price is $19.95. Sign up right away! The subscription gives you
weekly delivery of the print version and unlimited access to the magazine’s
website (www.economist.com).
·
Additional
readings are found in the “Course Documents” area of the class Blackboard site,
or will be distributed in class.
Overview of grades, tests and
dates |
||
|
Item |
% of final grade |
Dates |
|
Assignments (~ 3) |
20.0 |
Distributed as we go along |
|
Current-events analysis |
5.0 |
Once during the semester -- schedule to be distributed soon |
|
Test on fundamentals |
17.5 |
Friday, Oct. 5 |
|
7-10 page paper |
25.0 |
1-page summary submitted to Prof. Starr by
Oct. 23 Due the last day of class, Friday, Dec. 7
{or before} |
|
Final exam |
25.0 |
Friday, Dec. 14, 8:30-11:00am |
|
Class participation |
7.5 |
Throughout the semester. {policies given below} |
Assignments
Assignments will
be handed out 7-10 days before they are due and will also be posted in the
‘Assignments’ area of the Blackboard site. Assignments
involve two types of work: (1) Mini-research
projects, intended to build your skills in collecting, interpreting and
analyzing economic data and your ability to relate your findings in a clear,
compelling way; and (2) Practice problems,
which are quantitative exercises intended to provide practice for
quantitative-type questions that could appear on exams. Working together on assignments is encouraged –- but you must write up
your answers independently. Assignments must be submitted in class, unless you
make a prior arrangement with me.
Current-events analysis
Every Friday we will discuss important monetary and
financial events written about in previous week’s Economist. On one Friday during the semester, you will be required
to present a story related to ideas and issues being discussed in class, and to
give an analysis of it. The analysis should also be written up in 1-2 pages and
submitted to Prof. Starr. Detailed instructions and a schedule will be
distributed soon.
7-10 page paper
This paper can be on a topic of your choice related
to the theories, issues, ideas, and/or policy debates discussed in this class.
Detailed instructions will be distributed soon. To make sure that your project
is viable and well-framed, a 1-page explanation of your intended topic should be
submitted to Prof. Starr by Oct. 23.
CLASS
PARTICIPATION
7.5%
of the total grade comes from class participation, of which an important
component is attendance. To earn all 7.5 points, you would be expected to attend
virtually all classes and regularly answer questions, ask illuminating
questions, offer good insights, etc. Excellent attendance without much talking
is worth about 5 points. Irregularities in attendance automatically reduce participation
points to 3 or below.
|
Class
policies |
|
|
Make-up exams |
Not given, except for absences caused
by an unavoidable medical or family situation that I can verify (e.g. note
from health-care provider). |
|
Late work |
Accepted, but with points deducted. |
|
AU’s Academic Integrity Code |
In effect at all times! No plagiarism, no submitting work that
is not your own, no ‘collaboration’ in exams, etc. Violations will be
prosecuted! |
|
Grades |
Grades
reflect evaluation of course work as follows:
A Outstanding –- superlative work at
all times A- Excellent
–- consistently superlative work B+ Very
good B Good
B- Good,
but with notable gaps in understanding C Satisfactory D Poor F Failing |
Course outline and approximate
schedule
Notes:
·
Readings
other than Mishkin are found in the “Course documents” area of the Blackboard
site.
·
All
readings are required, but not all readings need to be read closely and
completely. A good strategy would be to read a paper through once, focusing on:
the key issue with which it is concerned, the key position(s) it takes,
evidence used to support its arguments, and its policy implications. Then after
the reading has been discussed in class, go back through and delve more deeply
into sections that were emphasized.
I. Introduction –- Aug. 31 – Sept. 4
II. Money and monetary policy in the U.S. and
Europe –- Sept. 7-25
A. Generalities
·
Chap. 3: “What is money?”
B.
Mechanics of money supply and monetary
policy
·
Chap. 13: “Multiple deposit creation and the
money supply process”
·
Chap. 15: “Tools of monetary policy”
·
Chap. 22: “Aggregate supply and demand”
D. Debates about how best to make monetary
policy
·
Chap. 19: “Quantity theory of money”
(foundation for monetarism), pp. 493-497
·
Chap. 12: “Structure of central banks and
the Federal Reserve System”
·
Chap. 16: “What should central banks do?
Monetary policy goals, strategies, and tactics”
·
Hand-out comparing the Fed, European Central
Bank, and Bank of England
·
European Central Bank, “What is price
stability important for you?”
·
Eric
Swanson, “Would an Inflation
Target Help Anchor U.S. Inflation Expectations?” (San Francisco Fed, Aug. 2006)
E. Electronic money and the future of monetary
policy
·
Ed Stephens, “Electronic money and the
future of central banks” (Cleveland Fed, 2002)
III. Money
and monetary policy in the global economy –- Oct. 2-30
·
Chap. 17: “Foreign exchange market”
·
Chap. 18: “International financial system”
B.
Monetary unions
·
Alexandre
Swoboda, “Robert Mundell and the Theoretical Foundation for the European
Monetary Union” (IMF, Dec. 1999)
·
Michael Klein, “European Monetary Union”
(1998)
·
International Monetary Fund, “Emerging
Europe” (April 2007)
·
Hand-out on Balassa-Samuelson effect
C. Appropriate
monetary policy regimes for emerging market countries
·
Collection
of short articles, “Alternative monetary policy arrangements for
emerging-market countries: Dollarization, currency boards, and monetary unions”
·
Optional: International Monetary
Fund, “Does inflation targeting work in emerging-market countries?” – DOES NOT
NEED TO BE READ unless you need or want further reading; will be summarized in
class
·
Articles from The Economist, “The euro versus the dollar”
·
International Monetary Fund, “Exchange rates
and the adjustment of the current-account deficit,” World Economic Outlook, April 2007.
IV. Banking and its regulation –- Nov. 2-27
·
Chap.
2: “Financial intermediaries,” pp. 35-46.
·
Chap.
8: “Economic analysis of financial structure” (information and incentive
problems”
·
Chap.
9: “Banking and the management of financial institutions”
B.
Markets for banking services: Competition and consolidation
·
Chap.
10: “Banking industry: Structure and competition”
·
Articles
from The Economist, “Global banking”
C. Bank
regulation and financial stability
·
Chap.
11: “Economic Analysis of Banking Regulation”
·
Articles from The Economist, “Basel”
V. Global
Financial Markets and Financial Crises –- Nov. 30-Dec. 7