Economics 185 Financial Markets

Fall 2000, Michael K. Salemi

Reading List and Syllabus

Text: R. Glenn Hubbard, Money, the Financial System and the Economy, 3^rdEdition, Addison Wesley, 2000.

I. Course Introduction: An overview of the relationships among money, payments, and the financial system.

Hubbard, Chapters 1-3

II. Saving, Investment, and the Determination of Interest Rates

Hubbard, Chapters 4 and 6
Discussion Project One: Adequacy of Saving Flows in the United States
Harris, Ethan and Charles Steindel, "The Decline in U.S. Saving and its Implications for Economic Growth," Quarterly Review, Federal Reserve Bank of New York, Volume 16, Winter 1991, 1-19.
Webb, Roy H., "Personal Saving Behavior and Real Economic Activity," Economic Quarterly, Federal Reserve Bank of Richmond, Spring 1993, 68-94.

III. Pricing of Financial Assets

Hubbard, Chapters 5, 7, 9-11

A.Term Structure of Interest Rates

B.Introduction to the Stock Market

C.Exchange Rates and Interest Rates

D.Derivative Securities

E.Financial Market Efficiency

Discussion Project Two: Explaining the Shape of the Yield Curve

Garner, C. Alan, "The Yield Curve and Inflation Expectations," Economic Review, Federal Reserve Bank of Kansas City, Sept/Oct 1987, 3-15.

Discussion Project Three: Are Stocks Overvalued?

Kopcke, Richard W., "Are Stocks Overvalued?", New England Economic Review, Sept/Oct 1997, 21-40

IV. Financial Markets and Institutions

Hubbard, Chapters 12-15
A. Introduction to Financial Institutions
B. Banks and the Banking Industry
C. The Regulation of the Banking Industry
Discussion Project Four: Whether the Government Should Insure Bank Deposits

Hoenig, Thomas M., "Bank Regulation: Asking the Right Questions," Economic Review, Federal Reserve Bank of Kansas City, First Quarter 1997, 5-10.

Russell, Stephen ed, "The Government's Role in Deposit Insurance," Review, Fed St. Louis, January/February 1993, 3-34.

V. Monetary Policy

Hubbard, Chapters 17, 18, 20, 23
A. Introduction to Monetary Policy
B. The Conduct of Monetary Policy

Discussion Project Five: Conduct of Monetary Policy in the Nineties

Sellon, Gordon H. Jr. and Charmaine R. Buskas, "New Challenges for Monetary Policy: A Summary of the Banks's 1999 Symposium," Economic Review, Federal Reserve Bank of Kansas City, Fourth Quarter 1999, 5-12.
Kozicki, Sharon, "How Useful Are Taylor Rules for Monetary Policy?," Economic Review, Federal Reserve Bank of Kansas City, Second Quarter 1999, 5-34.