The course begins with an introduction to the functions of money, the demand for money, the creation and control of the money supply, and the creation of credit.  This leads to an understanding of the functions of interest rates and to the concept of optimal rates of inflation.  The course then 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 are structured and what their mandates are.  This leads to a discussion about the operation of monetary policy in practice.  We  consider whether inflation targeting is welfare-maximizing policy in theory and practice and how the world appeared to achieve consensus on monetary policy  in the 1990s.  The course addresses what fundamental features of banking and financial markets  make them vulnerable to panics and crises and how financial regulation can be structured to redress some of the risks.  The course is intended for students in Graduate Diploma and Masters in International Economics and Development and also for Masters in Public Policy.

This course gives the student an understanding

1. of the functions and operation of banking institutions and financial markets,
2. of the money supply and demand process and the role of banks in the creation of money,
3. of the operation of monetary policy in the contemporary economy, 
4. of the impact on banks’ balance sheets of different monetary and regulatory policy actions,
5. of the relationship between monetary aggregates and the real economy,
6. of how the effects of monetary policy are transmitted to the real economy,
7. of the range and importance of the mandates for central banks and their methods of operation in several countries of Asia,
8. of the sources of market failure in finance and the role of regulation in managing financial crises.

Students will also learn how to search for, and interpret, data relevant to the operation of monetary policy in the countries of Asia and the major economies of the world and will develop some understanding of how to evaluate monetary policy actions.

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

Frederic Mishkin, The Economics of Money, Banking and Financial Markets, Addison-Wesley, 9th edition, chapter 1

WEEK 1 

F Mishkin,  The Economics of Money, Banking and Financial Markets, 9th  edition, Pearson,  chapters 3, 14, 19

or

F Mishkin,  The Economics of Money, Banking and Financial Markets, 8th edition, Pearson,  chapters 3, 13, 14, 19

Miles and Scott, Macroeconomics: Understanding the Wealth of Nations, 2nd edition pp 273-277 (Chapter 11)

F Mishkin,  The Economics of Money, Banking and Financial Markets, 8th edition or 9th edition,  Pearson,  chapter 1,

D Miles and A Scott, Macroeconomics, Understanding the Wealth of Nations, 2nd ed, Wiley, chapter 11 pp 284-287

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

F Mishkin,  The Economics of Money, Banking and Financial Markets, 8th edition or 9th edition, Pearson,  chapter 24

Miles and Scott,  Chap 11 pp 257 – 270, pp 277 –

WEEK 2

F Mishkin,  The Economics of Money, Banking and Financial Markets, 8th or 9th edition, Pearson,  chapters (background 20,21,22), 23

Miles and Scott, Chapter 15 pp 398 – 401 and Chapter 12 pp 377 - 384

WEEK 3

F Mishkin,  The Economics of Money, Banking and Financial Markets, 8th edition, Pearson,  review chapter 14, chapters  15 & 16 (please also read chapter 13 of 9th ed)

Or

F Mishkin,  The Economics of Money, Banking and Financial Markets, 9th edition, Pearson,  review chapter 14, chapters 13, 15 & 16 pp 395 – 399 and pp 418 – 419.

F Mishkin,  The Economics of Money, Banking and Financial Markets, 8th edition, Pearson,  Chapter 16, pp 402 – 411

Or

F Mishkin,  The Economics of Money, Banking and Financial Markets, 9th edition, Pearson,  Chapter 16, pp 399 - 412

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

F Mishkin,  The Economics of Money, Banking and Financial Markets, 8th  or 9th edition, Pearson,  chapters 25

Cukierman, A (2007): Central Bank Independence and Monetary Policymaking Institutions - Past Present and Future http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=6441.asp

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

WEEK 4

F Mishkin,  The Economics of Money, Banking and Financial Markets, 8th or 9th edition, Pearson,  chapters 8 and 11.

F Mishkin,  The Economics of Money, Banking and Financial Markets, 9th edition, Pearson, chapter 9 and 11 and Chap 16 pp 415 – 426 (this is not included in 8th edition so you need to read the 9th)

M Brunnermeier, 2008,  “Deciphering the 2007 – 08 Liquidity and Credit Crunch”, Journal of Economic Perspectives, 2008

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

Jean-Charles Rochet,  2008, Why are there so many Banking Crises? The Politics and Policy of Bank Regulation, Introduction and Chapter 1.

WEEK 5 – 6

F Mishkin,  The Economics of Money, Banking and Financial Markets, 9th edition, Pearson, chapter 9 and 11 and Chap 16 pp 415 – 426 (not included in 8th edition)

M Brunnermeier, 2008,  “Deciphering the 2007 – 08 Liquidity and Credit Crunch”, Journal of Economic Perspectives, 2008

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

Jean-Charles Rochet,  2008, Why are there so many Banking Crises? The Politics and Policy of Bank Regulation, Introduction and Chapter 1.