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College of Business Administration

Depart= ment of Economics

Money = and Banking

Lectur= er: O. Mikhail

ECO 32= 23-0001

Spring= 2006

Course Outline

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

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

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

Office Hours : &= nbsp; Monday, Wednesday, Thursday 11:00 a.m. – 12:30 p.m.

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

Class Web Page: h= ttp://www.bus.ucf.edu/omikhail/Eco3223/W2006/Eco-3223-W2006.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)

Assignments= &nb= sp; &= nbsp; &= nbsp; &= nbsp; &= nbsp; 10%

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

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

Final Exam (Monday, May 1^st, 200= 6) &= nbsp; &= nbsp; 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

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 Monday, May 1^st, 2006 from 7:00 p.m. = to 9:50 p.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)
01/09/06	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
01/16/06	Martin Luther King Jr. Day
01/23/06	Part II: Interest Rates, Financial Instruments and Markets Future value, Present value and Interest = Rates Understanding Risk	4-5
01/30/06	Bonds, Bond Prices, and the Determination= of Interest Rates The Risk and Term Structure of Interest R= ates	6-7
02/06/06	QUIZ I Part II: Interest Rates, Financial Instruments and Markets Chapters 4, 5, 6, and 7
02/13/06	Part III: Financial Institutions The Economics of Financial Intermediation= Depository Institutions: Banks and Bank Management	11
02/20/06	Financial Industry Structure Regulating the Financial System	13-14
02/27/06	QUIZ II – Part III: Financial Institutions Chapters 11, 13 and 14=
03/06/06	Central Banks in the World Today The Structure of Central Banks: The Feder= al Reserve and the European Central Bank	15-16
03/13/06	Spring Break
03/20/06	The Central Bank Balance Sheet and the Mo= ney Supply Process Monetary Policy: Using Interest Rates to Stabilize the Domestic Economy	17-18
03/27/06	QUIZ III Part IV: Central Banks, Monetary Policy and Financial Stability Chapters 15, 16, 17 and 18
04/03/06	Part V: Modern Monetary Economics Money Growth, Money Demand, and Modern Mo= netary Policy Modern Monetary Policy and Aggregate Dema= nd	20-21
04/10/06	Modern Monetary Policy and Aggregate Dema= nd Understanding Business Cycles<= /span>	21-22
04/17/06	QUIZ IV – Part V: Modern Monetary Economics Chapters 20, 21 and 22=
04/24/06	Term paper is Due (04/28/06) Monetary Policy, Output, Inflation in the= Short Run Review for the Final Exam	23
05/01/06	Final Exam

Academic Dates – Spring 2006

Academic Dates and Deadlines
Classes Be= gin	January 9 =
Late Regis= tration and Add/Drop	January 9 = - 13
Last Day f= or Full Refund	January 13=
Grade Forg= iveness Deadline (ends at 5:00 p.m.)	January 13=
Withdrawal Deadline	March 3
Class Sche= dule and Appointments for Summer 2006/Fall 2006/Spring 2007 Available on MyUCF	March 6
Registrati= on for Summer 2006/Fall 2006/Spring 2007 begins=	March 27
Founder's = Day Honors Convocation	April 5
Fall and S= ummer Textbook Orders Due<= /p>	April 7
Classes En= d; Last Day to Remove Incomplete	April 24
Final Exam= ination Period	April 25 -= May 1
Grades Due= in Registrar's Office (noon)	May 4
Commenceme= nt	May 4 - 6<= span style=3D'color:black'>

Spring 20= 06 Holidays
Martin Lut= her King Jr. Day	January 16=
Spring Bre= ak	March 13 -= 18
Spring 2006 Special Events
Founder's = Day Honors Convocation (Classes still held)<= /o:p>	April 5, 2= 006

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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.