This course gives the student an appreciation of the operation and importance of banking institutions, financial markets, the money supply and monetary policy in the contemporary economy.  The course begins with an introduction to the functions of money, the creation and control of the money supply, the creation of credit and the operation and structure of financial markets. This leads to an understanding of the functions and formation of interest rates.  The course provides the tools to understand the operation of the real macro economy and the operation of monetary policy.  The course also describes how central banks think about monetary policy in practice and considers whether inflation targeting is welfare-maximizing in theory and practice.  If there is enough time, we then address three special topics: i) financial stability; ii) how the world achieved consensus on monetary policy; and iii) financial integration in the Asian region. 

Students will gain the ability to analyse the strategy and tactics of monetary policy from the perspective of both theory and practice. Students will also be able to assess the role of banks in the economy. 

One research paper and one exam.   Weightings to be discussed in class and decided with input from students.  

30 contact hours (6 days @ 5 hours)

Master of Public Policy students should have Economics for Government.  Other students not enrolled in an economics degree will need some basic macro and microeconomics.  

ECON2026

For Public Policy students, POGO8081 Economics for Government

Frederic Mishkin, The Economics of Money, Banking and Financial Markets, Addison-Wesley, 9^th edition

F Mishkin,  The Economics of Money, Banking and Financial Markets, 8^th edition, Pearson

Miles and Scott, Macroeconomics: Understanding the Wealth of Nations, 2^nd edition Chapter 11 and 15

McCandless and Weber, 1995, Some Monetary Facts, Federal Reserve Bank of Minneapolis Quarterly Review, vol 19, # 3

Cukierman, A (2007): Central Bank Independence and Monetary Policymaking Institutions - Past Present and Future

C Crowe and E Meade, 2007,  The Evolution of Central Bank Governance around the World,  Journal of Economic Perspectives, Vol 21, no 4.

Goodfriend, M., "How the World Achieved Consensus on Monetary Policy," in the Journal of Economic Perspectives, 2007.

M Brunnermeier, 2008,  "Deciphering the 2007 - 08 Liquidity and Credit Crunch", Journal of Economic Perspectives, forthcoming 2008

H S Shin, 2008, "Reflections on Modern Bank Runs: A Case Study of Northern Rock", Journal of Economic Perspectives, forthcoming 2008.