The Economics of Money, Banking and Financial Markets Frederic S. Mishkin

Contents PART 1 Introduction PART 2 Financial Markets PART 3 Financial Institutions PART 4 Central Banking and the Conduct of Monetary Policy PART 5 International Finance and Monetary Policy PART 6 Monetary Theory

Works 1、Financial Markets and Institutions 2、Inflation Targeting: Lessons from the International Experience 3、Money, Interest Rates, and Inflation 4、A Rational Expectations Approach to Macroeconometrics: Testing Policy Ineffectiveness and Efficient Markets Models

Why Study Money, Banking, and Financial Markets? chapter 1 Why Study Money, Banking, and Financial Markets?

Why Study Financial Markets? 1. Channel funds from savers to investors, thereby promoting economic efficiency 2. Affect personal wealth and behavior of business firms Why Study Banking and Financial Institutions? 1. Financial Intermediation Helps get funds from savers to investors 2. Banks and Money Supply Crucial role in creation of money 3. Financial Innovation Why Study Money and Monetary Policy? 1. Influence on business cycles, inflation, and interest rates

Bond Market A security is a claim on the issuer’s future income or assets. P3 A bond is a debt security that promises to make payments periodically for a specified period of time. Interest rate is the cost of borrowing or the price paid for the rental of funds. P4

Stock Market A common stock represents a share of ownership in a corporation.

Stock Market

Foreign Exchange Market It affect pubic and businesses. Affect the cost of foreign goods and vacationing abroad. Foreign exchange rate P5

Money and Business Cycles

Money and the Price Level “Inflation is always and everywhere a monetary phenomenon “(Milton Friedman)

Money Growth and Inflation

Money Growth and Interest Rates

Budget Deficits and Monetary Policy

Appendix: Definitions Aggregate Output Gross Domestic Product (GDP) = Value of all final goods and services produced in domestic economy during year Aggregate Income Total income of factors of production (land, capital, labor) during year Distinction Between Nominal and Real Nominal = values measured using current prices Real = quantities, measured with constant prices Aggregate Price Level nominal GDP GDP Deflator = real GDP $9 trillion GDP Deflator = = 1.50 $6 trillion Consumer Price Index (CPI) price of “basket” of goods and services

Financial markets, markets in which funds are transferred from people who have an excess of available funds to people who have a shortage. 3 types Bond market; Stock market; Foreign exchange market;