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Money and Banking

TEXT AND REFERENCE MATERIAL & FIVE PARTS OF THE FINANCIAL SYSTEM Next >>>
 
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Money & Banking ­ MGT411
VU
Lesson 1
TEXT AND REFERENCE MATERIAL &
FIVE PARTS OF THE FINANCIALSYSTEM
ThePrimary textbook for thecourse will be
"Money,Banking and Financial Markets" by Stephan G. Cecchetti
InternationalEdition, McGraw Hill Publishers, ISBN0-07-111565-X"
Referencebooks will be
"The Economics of Money, Banking and FinancialMarkets", by Fredrick S. Mishkin
7th Edition Addison Wesley Longman Publishers
"Principles of Money, Banking and FinancialMarkets" by Lawrence S. Ritter,Willaim L.
Silber and Gregory F. Udell, Addison Wesley Longman Publishers
CourseContents
Moneyand the FinancialSystem
Moneyand the PaymentsSystem
Financial Instruments, Financial Markets, and Financial Institutions
Interest rate, financial instruments andfinancial markets
FutureValue, Present Value andInterest Rates
UnderstandingRisk
Bonds, Pricing and Determination of InterestRates
TheRisk and Term Structure of Interest Rates
Stocks,Stock Markets and MarketEfficiency
FinancialInstitutions
Economics of Financial Intermediation
DepositaryInstitutions: Banks and bankManagement
FinancialIndustry Structure
Regulating the financial system
Central Banks, Monetary Policy andFinancial stability
Structure of central banks
Balance sheet and Money Supplyprocess
Monetarypolicy
Exchange rate policy
ModernMonetary Economics
Moneygrowth and Money Demand
Aggregatedemand
BusinessCycle
Output and inflation in the short run
Moneyand Banking in Islam
Monetaryand financial policy and structure for an Interest-free economy
IslamicBanking in the contemporaryworld
FiveParts of the FinancialSystem
Money
Financial Instruments
FinancialMarkets
FinancialInstitutions
Central Banks
1. Money
To pay for purchases
To store wealth
Evolvedfrom gold and silver coins to paper money to today's electronicfunds transfers
1
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Money & Banking ­ MGT411
VU
TraditionalPaycheck system vs. ATM Withdrawals and Mailed transactionsvs. E-banking
2. Financial Instruments
To transfer wealth from savers to borrowers
To transfer risk to those bestequipped to bear it.
Onceinvesting was an activityreserved for the wealthy
Costlyindividual stock transactions through stockbrokers
Informationcollection was not so easy
Now,small investors have the opportunity to purchase shares in "mutualfunds."
3. Financial Markets
To buy and sell financial instruments quickly and cheaply
Evolvedfrom coffeehouses to tradingplaces (Stock exchanges) to electronic networks
Transactions are much more cheapernow
Marketsoffer a broader array of financial instruments than were available even 50 years ago
4. Financial Institutions
Provideaccess to financialmarkets
Banks evolved from Vaults and developed into deposits- and loans-agency
Today'sbanks are more likefinancial supermarkets offering a huge assortment of financial
products and services forsale.
Access to financial markets
Insurance
Home- and car-loans
Consumercredit
Investmentadvice
5. Central Banks
Monitorsfinancial Institutions
Stabilizes the Economy
Initiated by Monarchs to finance the wars
Thegovt. treasuries have evolvedinto the modern centralbank
Control the availability of money and credit in such a way as to ensure
Lowinflation,
Highgrowth, and
Thestability of the financialsystem
StateBank of Pakistan www.sbp.org.pk
Summary
FiveParts of the FinancialSystem
Money
Financial Instruments
FinancialMarkets
FinancialInstitutions
Central Banks
2
Table of Contents:
  1. TEXT AND REFERENCE MATERIAL & FIVE PARTS OF THE FINANCIAL SYSTEM
  2. FIVE CORE PRINCIPLES OF MONEY AND BANKING:Time has Value
  3. MONEY & THE PAYMENT SYSTEM:Distinctions among Money, Wealth, and Income
  4. OTHER FORMS OF PAYMENTS:Electronic Funds Transfer, E-money
  5. FINANCIAL INTERMEDIARIES:Indirect Finance, Financial and Economic Development
  6. FINANCIAL INSTRUMENTS & FINANCIAL MARKETS:Primarily Stores of Value
  7. FINANCIAL INSTITUTIONS:The structure of the financial industry
  8. TIME VALUE OF MONEY:Future Value, Present Value
  9. APPLICATION OF PRESENT VALUE CONCEPTS:Compound Annual Rates
  10. BOND PRICING & RISK:Valuing the Principal Payment, Risk
  11. MEASURING RISK:Variance, Standard Deviation, Value at Risk, Risk Aversion
  12. EVALUATING RISK:Deciding if a risk is worth taking, Sources of Risk
  13. BONDS & BONDS PRICING:Zero-Coupon Bonds, Fixed Payment Loans
  14. YIELD TO MATURIRY:Current Yield, Holding Period Returns
  15. SHIFTS IN EQUILIBRIUM IN THE BOND MARKET & RISK
  16. BONDS & SOURCES OF BOND RISK:Inflation Risk, Bond Ratings
  17. TAX EFFECT & TERM STRUCTURE OF INTEREST RATE:Expectations Hypothesis
  18. THE LIQUIDITY PREMIUM THEORY:Essential Characteristics of Common Stock
  19. VALUING STOCKS:Fundamental Value and the Dividend-Discount Model
  20. RISK AND VALUE OF STOCKS:The Theory of Efficient Markets
  21. ROLE OF FINANCIAL INTERMEDIARIES:Pooling Savings
  22. ROLE OF FINANCIAL INTERMEDIARIES (CONTINUED):Providing Liquidity
  23. BANKING:The Balance Sheet of Commercial Banks, Assets: Uses of Funds
  24. BALANCE SHEET OF COMMERCIAL BANKS:Bank Capital and Profitability
  25. BANK RISK:Liquidity Risk, Credit Risk, Interest-Rate Risk
  26. INTEREST RATE RISK:Trading Risk, Other Risks, The Globalization of Banking
  27. NON- DEPOSITORY INSTITUTIONS:Insurance Companies, Securities Firms
  28. SECURITIES FIRMS (Continued):Finance Companies, Banking Crisis
  29. THE GOVERNMENT SAFETY NET:Supervision and Examination
  30. THE GOVERNMENT'S BANK:The Bankers' Bank, Low, Stable Inflation
  31. LOW, STABLE INFLATION:High, Stable Real Growth
  32. MEETING THE CHALLENGE: CREATING A SUCCESSFUL CENTRAL BANK
  33. THE MONETARY BASE:Changing the Size and Composition of the Balance Sheet
  34. DEPOSIT CREATION IN A SINGLE BANK:Types of Reserves
  35. MONEY MULTIPLIER:The Quantity of Money (M) Depends on
  36. TARGET FEDERAL FUNDS RATE AND OPEN MARKET OPERATION
  37. WHY DO WE CARE ABOUT MONETARY AGGREGATES?The Facts about Velocity
  38. THE FACTS ABOUT VELOCITY:Money Growth + Velocity Growth = Inflation + Real Growth
  39. THE PORTFOLIO DEMAND FOR MONEY:Output and Inflation in the Long Run
  40. MONEY GROWTH, INFLATION, AND AGGREGATE DEMAND
  41. DERIVING THE MONETARY POLICY REACTION CURVE
  42. THE AGGREGATE DEMAND CURVE:Shifting the Aggregate Demand Curve
  43. THE AGGREGATE SUPPLY CURVE:Inflation Shocks
  44. EQUILIBRIUM AND THE DETERMINATION OF OUTPUT AND INFLATION
  45. SHIFTS IN POTENTIAL OUTPUT AND REAL BUSINESS CYCLE THEORY