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College of Business Administration

Depart= ment of Economics

Money = and Banking

Lectur= er: O. Mikhail

ECO 32= 23-0001

Summer= 2006

Course Outline

Time = &nb= sp; : &= nbsp; MTuWTh 2:00 p.m. to 3:50 p.m.

Location&nb= sp; : &= nbsp; BA I - 147.

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

Office Hours : &= nbsp; Tu 12:00 p.m. – 1:00 p.m. and Tu Th 4:00 p.m. – 5:00 p.m.

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

Class Web Page:h= ttp://www.bus.ucf.edu/omikhail/Eco3223/S2006/Eco-3223-S2006.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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In Mon= ey 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. In this class, we will study: mo= ney and the financial system, interest rates, financial instruments, financial markets and financial institutions. Then we will focus on central banks, monetary policy and financial stability. Finally, we will study how all of these fit together in providing modern monetary economics. We will use a macroeconomic model to understand and 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 matter? What kind of [and which] regulations should exist on their behavior – if any? Which monetary policy is ought to be pursued to recover fro= m a recession – if any? How= do monetary policies influence the economy, the business cycle and the economic agent well-being? What are the functions and role of money in the economy? In this class, we will attempt to understand the extent, the magnitude and the influence of the financial sec= tor 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. Furthermore, students are expected to understand and explain the principles underlying the determination of interest rates, money supply, mo= ney 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

The lecture notes are not substitutes for the textboo= k; 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)

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

Quizzes (4 Quizzes) &n= bsp; = ; &n= bsp; = ; 40%

Final Exam (June 22^nd, 2006) &n= bsp; &= nbsp; &= nbsp; 40 %

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

Your best three quizzes will count toward y= our final grade. Extra-credit assignment(s) are announced in class. No early or make-up exams will be giv= en, unless for a valid reason. The Final Exam will be held on June 22^nd, 2006.

Assignments

A set of VOLUNTARY ass= ignments will be posted on the class web page. These assignments will be corrected a= nd non-graded. The purpose of th= ese assignments [if you choose to do them] is to help you understand the materi= al and to prepare you for the essay questions on the quizzes and the final exa= m.

Finding Monetary Data=

Printed format

Subscribe to the National Economic Trends – The Federal Reserve Bank of St. Lo= uis.

http://research.stlouisfed.org/publications/net/

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)
05/15/06	Part I: Money and the Financial System Introduction, Money and the Financial Sys= tem Money and the Payments System<= /span>	1-2
05/16/06	Part II: Interest Rates, Financial Instruments and Markets Financial System: Instruments, Markets and Institutions Future value, Present value and Interest = Rates	3-4
05/17/06	Bonds, Bond Prices, and the Determination= of Interest Rates	6
05/18/06	QUIZ I Part I: Money and the Financial System Part II: Interest Rates, Financial Instruments and Markets Chapters 1, 2, 3, 4 and 6
05/22/06 05/23/06 05/24/06	Part III: Financial Institutions The Economics of Financial Intermediation= Depository Institutions: Banks and Bank Management Financial Industry Structure Regulating the Financial System	11-13-14
05/25/06	QUIZ II – Part III: Financial Institutions Chapters 11, 13 and 14=
05/29/06	Memorial Day
05/30/06 05/31/06 06/01/06	Part IV: Central Banks, Monetary Policy and Financial Stability Central Banks in the World Today The Structure of Central Banks: The Feder= al Reserve and the European Central Bank The Central Bank Balance Sheet and the Mo= ney Supply Process	15-16-17
06/05/06 06/06/06 06/07/06	The Central Bank Balance Sheet and the Mo= ney Supply Process Monetary Policy: Using Interest Rates to Stabilize the Domestic Economy Part V: Modern Monetary Economics Money Growth, Money Demand, and Modern Mo= netary Policy	17-18-20
06/08/06	QUIZ III Part IV: Central Banks, Monetary Policy and Financial Stability Chapters 15, 16, 17 and 18
06/12/06 06/13/06 06/14/06 06/15/06	Modern Monetary Policy and Aggregate Dema= nd Understanding Business Cycles<= /span> The Risk and Term Structure of Interest R= ates [= If we finished Chapters 21, 22 and 7 by 06/14/06, then we will have QUIZ IV on 06/15/06, otherwise = QUIZ IV will be held on 06/19/06]	21-22-7
06/19/06	QUIZ IV – Part V: Modern Monetary Economics Chapters 7, 20, 21 and 22
06/20/06	Monetary Policy, Output, Inflation in the= Short Run Term paper is Due (06/20/06)	23
06/21/06	Review for the Final Exam
06/22/06	Final Exam

Academic Dates – Summer 2006 &#= 8211; Session A

&= nbsp;	Session A	Session B=	Session C=	Session D=
	6 Weeks	6 Weeks	12 Weeks	9 Weeks

Academic Dates and Deadlines
Cl= asses Begin	May 15	June 26	May 15	May 15
La= te Registration and Add/Drop	May 15 - 19	June 26 - 30	May 15 - 19	May 15 - 19
La= st Day for Full Refund	May 19	June 30	May 19	May 19
Gr= ade Forgiveness Deadline #	May 19	June 30	May 19	May 19
Fe= es due	May 26	May 26, July 7,=	May 26	May 26
Wi= thdrawal Deadline	June 2	July 14	June 23	June 16
Cl= asses End; Last Day to Remove Incomplete	June 23	Aug 4	Aug 4	July 14
Final Examination Period ****	June 23	Aug 4	Aug 4	July 14
Re= sidence Halls Close (noon)	June 24	Aug 5	Aug 5	July 15
Gr= ades Due in Registrar’s Office (noon)	June 28	Aug 9	Aug 9	July 19
Grades will be processed as available and will be final at 9 a.m. through MyUCF	June 29	Aug 11	Aug 11	July 20
Co= mmencement	August 5

Summer 2006 Holidays and Special Events
Me= morial Day	Ma= y 29, 2006
In= dependence Day	Ju= ly 4, 2006

# Ends at 5:00 p.m. on the last day
**** Summer Final Examinations are given during the last class mee= ting.

<= /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.