EC320-Money and Banking

Module Provider: School of Politics, Economics and International Relations
Number of credits: 20 [10 ECTS credits]
Level:6
Terms in which taught: Spring term module
Pre-requisites: EC201 Intermediate Microeconomics and EC202 Intermediate Macroeconomics
Non-modular pre-requisites:
Co-requisites:
Modules excluded:
Current from: 2023/4

Module Convenor: Dr Christos Mavrodimitrakis
Email: c.mavrodimitrakis@reading.ac.uk

Type of module:

Summary module description:

ÌýThis module builds on Intermediate Macroeconomics to study the economics of money, banking, and financial markets. The module consists of two basic parts: Financial Markets and Institutions; and Central Banking and Monetary Policy; while the role of money is at the centre of the analysis. Both the Great Recession and the Covid-19 pandemic highlight the volatility of financial markets and demonstrate the importance of central banks to the health of the financial system and the economy. This volatility can hit financial consumers directly, leading to difficulty in getting loans, falling home values, declining retirement account values and jeopardising jobs. We discuss interest rates, their relation to bond prices and returns, and their determination. We extend the analysis of the bond market to explain changes in credit spreads and the term structure. We also look at the role of expectations in the stock market and explore what drives stock prices. Financial institutions are central in the workings of the economy. We will look at financial structure and at the business and process of banking. On central banking, we explore what central banks are trying to achieve; what motivates them; how the money supply is determined; what are the policy tools central banks have in their disposal; how monetary policy is being conducted. We further discuss how the quantity theory of money explains inflation in the long run and how theories of the demand for money have evolved; the role of expectations in monetary policy; and the transmission mechanisms through which monetary policy affects the aggregate economy.

Aims:

• To provide an understanding of how interest rates, money supply and central bank actions affect the decisions of economic agents, financial markets and prices;


• to increase students’ awareness on the importance of monetary and financial policies for financial analysis;


• to demystify central bank policies by developing an understanding of their purpose, organisation, function, and operations;


• to introduce students to recent developments and timely policy debates about financial markets and the role of central banks.

Assessable learning outcomes:

• On completion of the course, students should: demonstrate an understanding of the role of money in modern financial systems;


• understand how the interest rates are determined, what are the factors affecting their behaviour and what is their risk and term structure;


• understand the role of financial institutions and how banks are different from other financial intermediaries;


• understand the role and functions of central banks and the way they formulate monetary policy;


• demonstrate an understanding of the various channels of monetary policy.

Additional outcomes:

Throughout the process of completing set exercises, students will have the opportunity to develop the skills required to do relevant research, write reports, understand technical articles, and apply theoretical knowledge to real world situations.

Outline content:

Basic topics include: money; the meaning, behaviour, risk and term structure of interest rates; basics of financial system, bonds, stocks; financial institutions and bank (liquidity) management; central banks; the money supply process; tools and conduct of monetary policy; theories of money demand; transmission channel of monetary policy. Additional content covered may include: the stock market; the role of expectations in monetary policy.

Brief description of teaching and learning methods:

Detailed guidance on the topics covered will be provided in the weekly lectures, together with occasional handouts covering the material discussed, examples, exercises and solutions to facilitate understanding of key concepts. ºÚ¹Ï³ÔÁÏÍøs from academic journals and/or policymaking institutions will be assigned for each lecture, if needed.

Contact hours:

Ìý	Autumn	Spring	Summer
Lectures		20	2
Guided independent study:		160	18
Ìý	Ìý	Ìý	Ìý
Total hours by term	0
Ìý	Ìý	Ìý	Ìý
Total hours for module	200

Summative Assessment Methods:

Method	Percentage
Written exam	60
Written assignment including essay	40

Summative assessment- Examinations:

One 3-hour in-person exam that consists of an unseen written paper.

Part 3 examinations are held in the Summer term

The examination for this module will require a narrowly defined time window and is likely to be held in a dedicated exam venue.

Summative assessment- Coursework and in-class tests:

A take-home written assignment aimed primarily at ascertaining a student’s understanding and comprehension of a subset of the materials covered during lectures.Ìý

Formative assessment methods:

Penalties for late submission:

The Support Centres will apply the following penalties for work submitted late:

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of five working days;
• where the piece of work is submitted more than five working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

The University policy statement on penalties for late submission can be found at: /cqsd/-/media/project/functions/cqsd/documents/cqsd-old-site-documents/penaltiesforlatesubmission.pdf
You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Assessment requirements for a pass:

A minimum overall mark of 40%.

Reassessment arrangements:

Re-examination for all modules takes place in August of the same year. Re-assessment is by examination only; in-class test is not included at the second attempt.

Additional Costs (specified where applicable):

1) Required text books:Ìý The Economics of Money, Banking, & Financial Markets: European Edition, by Frederic S. Mishkin, Kent Matthews, and Massimo Giuliodori, 2013, Pearson Publishers, ISBN: 978-0-273-73180-1, (Estimated Price: £59.84)

2) Specialist equipment or materials:Ìý None

3) Specialist clothing, footwear or headgear:Ìý None

4) Printing and binding:Ìý None

5) Computers and devices with a particular specification:Ìý None

6) Travel, accommodation and subsistence:Ìý None

Last updated: 24 August 2023