Two essential readings, complementing each other, are recommended for this course: Mishkin (2004) focuses on money and central banking within the environment of a modern financial system, providing US but also international examples; Howells and Bain (2004), in turn, introduces financial markets and institutions within mostly the UK context. In addition, the use of two older but quite successful books is encouraged as supplementary reading on certain topics, as indicated further down: Fraser, Gup and Kolari (2001) - or the new edition, Gup and Kolari (2004) - takes the view of commercial banks in their role as intermediaries between savers and debtors in the economy; Goodhart (1988), on the other hand, provides a dense historical and functional analysis of the evolution of central banks. Other sources, including book chapters and journal articles, are sometimes suggested as background reading on particular aspects of a topic. For those who are strongly interested in the subject matter of the course, specialised journals and websites have been selected from a multitude of relevant ones: these contain articles and documents, often downloadable as pdf files.
Because of the comprehensiveness and complementarity of the two textbooks, no detailed lecture notes (or handouts) will be provided for this course. Yet to help students in their preparation, the course outline which follows specifies the precise chapters expected to be read from each source. Moreover, the presentation slides to be discussed in class are made available on this course website: they condense the material of each lecture into an essential structure that is easy to remember. As the course proceeds on, updated versions of these slides will be posted in advance of each lecture. Any feedback will be appreciated.
1. Mishkin, Frederic, The Economics of Money, Banking, and Financial Markets, Addison-Wesley, 2004 (7th ed.) – presents at an introductory level but in a very comprehensive way the financial system within which modern central banks conduct their monetary policies as well as the role played by commercial banks and other financial-sector intermediaries in both a national and international perspective; student resources are available on the publisher's website.
2. Howells, Peter and Keith Bain, Financial Markets and Institutions, Prentice Hall – Financial Times, 2004 (4th ed.) – fulfils objectives similar to those of Mishkin (2004), at the same time benefiting from extreme pedagogical clarity, relative conciseness and pragmatic orientation, in particular on how to read financial pages in the UK institutional context; student resources are available on the publisher's website.
1. Fraser, Donald, Benton Gup and James Kolari, South-Western - Thomson Learning, 2001 (2nd ed.) or Gup, Benton and James Kolari, John Wiley & Sons, 2004 (3rd ed.), Commercial Banking: The Management of Risk – focuses in a straightforward way on the special role of commercial banks in the economy, presenting their structure and operations with view to the latest banking developments and with a particular emphasis on bank and risk management.
2. Goodhart, Charles, The Evolution of Central Banks, MIT Press, 1988 (2nd ed.) – a brief but informative account of the difficult craft of central banking, as it emerged and evolved, by a prominent economic historian and policy advisor in the domain.
1. Rose, Peter and Sylvia Hudgins, Bank Management & Financial Services, McGraw-Hill/Irwin, 2005 (6th international ed.) – a broad introductory textbook on banking with an up-to-date coverage of nonbank financial services providers and related innovations.
2. Blinder, Alan, Central Banking in Theory and Practice (Lionel Robbins Lectures), MIT Press, 1998.
3. IMF, Payment Systems, Monetary Policy, and the Role of the Central Bank, 1998.
4. Mizen, Paul (ed.), Central Banking, Monetary Theory and Practice: Essays in Honour of Charles Goodhart, Volume One, Edward Elgar, 2003 – also available on the shelves of the Albert Sloman Library.
5. Siklos, Pierre, The Changing Face of Central Banking: Evolutionary Trends since World War II (Studies in Macroeconomic History), Cambridge Univesrity Press, 2002.
6. Lavoie, Marc and Seccareccia, Mario (eds.), Central Banking in the Modern World: Alternative Perspectives, Edward Elgar, 2004.
All starred (*) references below are recommended as essential readings whereas the non-starred ones are suggested either as supplementary readings for a deeper understanding of a particular whole topic or as background readings on certain aspects of it.
1.1 Payments: Barter, Money and Credit
(1) *Mishkin, Chapters 1 and 3
1.2 Macroeconomics: Money, Output, Inflation and Interest Rates
(1) *Mishkin, Chapters 1 and 3
1.3 The Financial System and Its Key Institutions: Instruments, Markets and Intermediaries
(1) *Mishkin, Chapter 2
(2) Howells and Bain, Sections 1.1 and 1.2
1.4 The Financial System and Its Key Actors: Lenders and Borrowers
(1) *Howells and Bain, Sections 1.3
2.1 Interest Rates: Definition(s) and Behaviour
(1) *Mishkin, Chapters 4 and 5
(2) Howells and Bain, Section 7.1
2.2 Interest Rates and Their Risk and Term Structure
(1) *Mishkin, Chapter 6
(2) Howells and Bain, Section 7.7
2.3 Interest Rates and the Stock Market
(1) *Mishkin, Chapter 7
2.4 Interest Rates, Prices and the Exchange Rate: PPP and UIP
(1) *Mishkin, Chapter 19
(2) Howells and Bain, Sections 8.3 and 8.4
3.1 Analysing Financial Structure
(1) *Mishkin, Chapter 8
3.2 Economic Rationale for Financial Intermediation(1) *Mishkin, Chapter 8
3.3 Banking Industry: Competition
(1) *Mishkin, Chapter 10
3.4 Baking Industry: Regulation
(1) *Mishkin, Chapter 11
(2) Fraser, Gup and Kollari, Chapter 2 (on US)
(3) Howells and Bain, Chapter 12 (on UK)
4.1 Free Banking or a Central Bank?
(1) *Goodhart, Chapters 1, 2 and Appendix
(2) Thornton, H., “An Enquiry into the Nature and
Effects of the Paper Credit of Great Britain”, Rinehart and Co., 1939
(reprint, first published in 1802)
(3) Bagehot, W., “Lombard Street”, Homewood Ill.:
Richard D. Irwin, 1962 (reprint, first published in 1873)
4.2 Central Banks: Functions and Independence
(1) *Goodhart, Chapters 7 and 8
(2) Mishkin, Chapter 14 (on the Federal Reserve System)
(3) Howells and Bain, Chapter 12 (on the Bank of England)
4.3 The Money Supply Process
(1) *Mishkin, Chapter 15
4.4 Determinants of the Money Supply
(1) *Mishkin, Chapter 16
5.1 Money Demand: Theories and Empirics
(1) *Mishkin, Chapter 22
5.2 Money and Policy in IS-LM and AD-AS Analysis
(1) *Mishkin, relevant sections of Chapters 23, 24 and 25
5.3 Money and Inflation
(1) *Mishkin, Chapter 27
5.5 Rational Expectations and Implications for Policy
(1) *Mishkin, Chapter 28
6.1 The Market for Reserves and the Federal Funds Rate
(1) *Mishkin, Chapter 17
6.2 Tools of Monetary Policy
(1) *Mishkin, Chapter 17
6.3 Goals and Targets of Monetary Policy
(1) *Mishkin, Chapter 18
6.4 The Transmission Mechanism: Money and Credit Channels
(1) *Mishkin, Chapter 26
7.1 Commercial Banking as a Business
(1) *Fraser, Gup and Kolari, Chapter 1
7.2 Bank Performance, Deregulation and Risk Management
(1) *Fraser, Gup and Kolari, Chapter 3
7.3 Asset/Liability Management: Dollar and Duration Gaps
(1) *Fraser, Gup and Kolari, Chapter 5
7.4 Liquidity Management
(1) *Fraser, Gup and Kolari, Chapter 9
8.1 Why Banks Developed Off-Balance Sheet Activities?
(1) *Fraser, Gup and Kolari, Chapters 6 and 14
8.2 Financial Guarantees and Contingent Claims
(1) *Fraser, Gup and Kolari, Chapter 14
8.3 Financial Derivatives, Hedging and Securitisation
(1) *Fraser, Gup and Kolari, Chapters 6 and 14
(2) *Mishkin, Chapter 13
8.4 Other Off-Balance Sheet Activities of Banks
(1) *Fraser, Gup and Kolari, Chapter 14
9.1 Disintermediation
(1) *Fraser, Gup and Kolari, Chapter 15
(2) *Mishkin, Chapter 12
9.2 Nonbank Finance: Types and Innovations
(1) *Fraser, Gup and Kolari, Chapter 15
(2) *Mishkin, Chapter 12
9.3 Electronic Funds Transfer: Types and Innovation
(1) *Fraser, Gup and Kolari, Chapter 13
9.4 Seignorage
(1) *Fraser, Gup and Kolari, Chapter 13
10.1 Money and the State
(1) Glasner, D., “Free Banking and Monetary Reform”,
Cambridge University Press, 1989
(2) Podolski, T., “Financial Innovation and the Money Supply”,
Basil Blackwell, 1986
10.2 The Trend toward Cashlessness
(1) *Markose, S. and Y.J. Loke, “Changing Trends in Payment Systems
For Selected G10 and EU Countries 1990-1998”, International Correspondent Banking Review
Yearbook 2000/2001, April 2000: doc
(2) Markose, S. and Y.J. Loke, “The Microstructure of the Trend
To Cashlessness: UK and USA Compared”, University of Essex , Economics Department, 2000, mimeo
10.3 The Demise (?) of Monetarism: Deregulation, Securitisation, Disintermediation, ...
(1) *Goodhart, C. “Financial Innovation and Monetary Control”, Oxford Review of Economic Policy, 1986, Vol. 2 (4), pp. 79-101
10.4 Gold Standard, Paper Standard, Electronic Standard - an Assessment
(1) Podolski, T., “Financial Innovation and the Money Supply”, Basil Blackwell, 1986