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College of Business Administration

Depart= ment of Economics

Money = and Banking

Lectur= er: O. Mikhail

ECO 32= 23-0001

Fall 2= 006

Course Outline

Time = &nb= sp; : &= nbsp; Thursday 6:00 p.m. to 8:50 p.m.

Location&nb= sp; : &= nbsp; BA I - 122.

Office &n= bsp; : &= nbsp; BA II - 302.

Office Hours : &= nbsp; Monday and Wednesday 1:00 p.m. – 2:00 p.m.

= ; &n= bsp; = ; Thursday 2:00 p.m. – 4:00 p.m.

&n= bsp; = ; &n= bsp; Or by Appointment

Class Web Page: h= ttp://www.bus.ucf.edu/omikhail/Eco3223/F2006/Eco-3223-F2006.htm

E-Mail = ; = : &= nbsp; omikhail@hotmail.com

= ; &n= bsp; = ; omikhail@bus.ucf.e= du

Phone = : &= nbsp; 407-823-4258

Fax &n= bsp; = ; : &= nbsp; 407-823-3269

Course Objective

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What i= s the economic foundation of Money, Banking and Monetary policies? In Money and Banking, there are five core principles: 1) Time has value, 2) Risk requires compensation, 3) Information is the basis for decisions, 4) Market set pric= es and allocate resources, and 5) Stability improves welfare. These principles serve as a framework throughout the class. We will study: money and the fin= ancial system, interest rates, financial instruments, financial markets and financ= ial institutions. Then we will focus on central banks, monetary policy and financial stability, and finally, we will study how all of these fit togeth= er in modern monetary economics. We will use a macroeconomic model to understa= nd and to analyze the mechanism through which financial system influence the economy, inflation and growth.

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How do financial markets influence t= he allocation of resources in the economy? Why do they affect the level of economic activity? Does the structure of the financial system matter? Which= one matters the most: the domestic system or the international financial system= and what are the functions and limitations of each? Do financial institutions m= atter? What kind of [and which] regulations should exist on their behavior –= if any? Which monetary policy is ought to be pursued to recover from a recessi= on – if any? How do moneta= ry policies influence the economy, the business cycle and the economic agent w= ell-being? What are the functions and ro= le of money in the economy? In this class, we will attempt to understand the extent, the magnitude and the influence of the financial sector on the economy.

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Regard= less of your occupation, as long as you are involved in the financial market (as an analyst, a venture capitalist, a financial consultant, or a marketing specialist), and as long as your objective is to reach a profit maximizing = and efficient state, your knowledge of the interaction of the macroeconomics and the financial markets will aid, help and [exponentially] improve your forec= asts and decision-making process.

We will study the financial markets and the= dramatis personae (the cast of players) – the financial institutions – w= hich participate in it? A clear distinction between the money and the capital ma= rket will be developed. Also, we will study the characteristics, history, powers= and objectives of the central bank as a powerful financial institution.

Briefly, we will study an= d focus on the following:

The financial system: instruments, markets and institutions,
Interest rates,
The Central Bank (The Fed), the European Central = Bank, and
Modern Monetary Economics and policy.

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By the end of the class, = students should be able to understand and explain the nature and functions of money = by comparing the characteristics of a barter economy and a monetary economy. Students should also be able to un= derstand and explain what financial intermediation is and how it improves the performance of the economy. F= urthermore, students are expected to understand and explain the principles underlying t= he determination of interest rates, money supply, money demand and most of all= the mechanisms through which monetary policy affects the economy.

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Basic knowledge of algebra is required. Students are responsible for all materials covered in class that is presented in the textbook, in the study guide and in the lecture notes.

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Attend= ance at lectures is not mandatory but is recommended. If you are experiencing any difficulty in this class = (or any other), please arrange a meeting with me to discuss it.

E-mail Policy, Lecture Notes and Class Web = Page

Readings<= /st1:place> and announcements – posted on the class web page – are part of = your curriculum. I adopt the plus/minus letter grades as outlined on the class w= eb page. The lecture notes are not substitut= es for the textbook; they are a complement to the textbook.

Office Hours

If my office hours (stated above) conflict = with your schedule and you need to meet with me, please let me know [ASAP] so I can arrange a mutually acceptable time to meet.

Required Book

Cecchetti, Stephen G. (2006) Money, Banking= , and Financial Markets. McGraw Hill.

ISBN 0-07-245269-2

Visit = the book web page at http://ww= w.mhhe.com/economics/cecchetti1e

Evaluation (= Preliminary)

Assignments= &nb= sp; &= nbsp; &= nbsp; &= nbsp; &= nbsp; 5%

In-Class Exercises = &nb= sp; = &nb= sp; 5%

Team Term Paper &= nbsp; &nbs= p; &= nbsp; &= nbsp; 20%

Quizzes (3 Quizzes) &n= bsp; = ; &n= bsp; = ; 40%

Final Exam (Thursday, December 7, 2006) 30 %

Note= that the FINAL EXAM will be held from 7:00 p.m. to 9:50 p.m.

I expect you to uphold the guidelines of the Golden Rules, http://www.ucf.edu/= goldenrule

Out of the three quizzes, only your best two quizzes will count toward your fin= al grade.

Finding Monetary Data=

Printed format - Subscribe to the:

1= ) National Economic Trends – The Federal Reserve Bank of <= st1:place w:st=3D"on">St. Louis. http://research.s= tlouisfed.org/publications/net/

2= ) Monetary Trends – The Federal Reserve Bank of St. Louis. http://research.st= louisfed.org/publications/mt/

Data Retrieval – Electronic format

The Federal Reserve Bank of St. Louis Economic Data - FRED II http://research.stlouisfed.o= rg/fred2/

Class Structu= re

The class will be held in an active-discussion framework. = Due to the class size and the limited class time, I suggest that students form study groups outside of class to work through the study guide and end-of-chapter problems.

Reading List

Day	Topic	Chapter(s)
08/24	Part I: Money and the Financial System Introduction, Money and the Financial Sys= tem Money and the Payments System<= /span> Financial System: Instruments, Markets and Institutions	1-2-3
08/31	Part II: Interest Rates, Financial Instruments and Markets Future value, Present value and Interest = Rates Understanding Risk	4-5
09/04	Labor Day
09/07	Bonds, Bond Prices, and the Determination= of Interest Rates The Risk and Term Structure of Interest R= ates	6-7
09/14	QUIZ I Part II: Interest Rates, Financial Instruments and Markets Chapters 4, 5, 6, and 7
09/21	Part III: Financial Institutions The Economics of Financial Intermediation= Depository Institutions: Banks and Bank Management	11-12
09/28	Financial Industry Structure Regulating the Financial System	13-14
10/05	QUIZ II – Part III: Financial Institutions Chapters 11, 12, 13 and 14
10/12	Central Banks in the World Today The Structure of Central Banks: The Feder= al Reserve and the European Central Bank	15-16
10/19	The Central Bank Balance Sheet and the Mo= ney Supply Process Monetary Policy: Using Interest Rates to Stabilize the Domestic Economy	17-18
10/26	Monetary Policy	18
11/02	QUIZ III Part IV: Central Banks, Monetary Policy and Financial Stability Chapters 15, 16, 17 and 18
11/09	Part V: Modern Monetary Economics Money Growth, Money Demand, and Modern Mo= netary Policy Modern Monetary Policy and Aggregate Dema= nd	20-21
11/10-11/11	Veteran’s Day
11/16	Modern Monetary Policy and Aggregate Dema= nd Understanding Business Cycles<= /span>	21-22
11/23-11/25	Thanksgiving
11/30	Term paper is Due Monetary Policy, Output, Inflation in the= Short Run Review for the Final Exam	23
12/07	Final Exam

FALL 2006=
Academic Dates and Deadlines
Classes Begin	August 21
Academic Advising Weeks	October 9 - 20
Withdrawal Deadline	October 13
Graduate Thesis Dissertation Format Review Deadline (Doctoral)	October 13
Graduate Thesis Dissertation Format Review Deadline (Master's)	October 27
Graduate Thesis/Dissertation Defense Deadline	November 10
Graduate Thesis/Dissertation Submission Deadline=	November 27
Classes End; Last Day to Remove Incomplete=	December 2
Final Examination Period	December 4 - 9
Commencement	December 11 - 12
Grades available and will be final at 9 a.m. through = MyUCF	December 15
Fall 2006 Holidays
Labor Day	September 4
Veteran's Day	November 10 - 11
Thanksgiving	November 23 - 25

<= /o:p>

THE UCF CREED

Integrity, scholarship, community, creativity, and excellence are the core values
that guide our conduct, performance, and decisions.

Integrity

I will practice and defend academic and perso= nal honesty.

Scholarship

I will cherish and honor learning as a fundam= ental purpose
of my membership in the UCF community.

Community

I will promote an open and supportive campus environment by
respecting the rights and contributions of every individual. <= /p>

Creativity

I will use my talents to enrich the human experience.

Excellence

I will strive toward the highest standards of performance in any endeavor I undertake.

http://www.sdes.ucf.edu/Creed/