UNIVERSITY OF THE PHILIPPINES VISAYAS TACLOBAN COLLEGE TACLOBAN CITY

Course Syllabus Course number Course title Course credit Class venue, day & time Econ 121 Economics of Money and Banking 3 units AS 22 MTH, 8:30-10 AS Professor Consultation hours Phone Local E-mail Dr. Anita G. Cular MTH 8:30-10 Or by appointment 321-4479 anita_cular@yahoo.com

Course description Course goals At the end of the semester, the students should gain basic understanding on the concepts and theories related to money, banking and the financial system. The students are expected to internalize the relevance of money in the economy, and be able to integrate these concepts in their daily activities as active economic agents. Course objective To know the profile of my students To level off expectations of the students and the teacher To orient the students about the course and its requirements, To present the introductory concepts related to the course GTKY Key Concepts in the Financial System (Financial Markets; Bond Market, Stock Market, Foreign Exchange Markets, financial Chapter 1, Mishkin intermediaries, money and business cycles, money and inflation, money and interest rates, budget deficit and monetary policy The function of financial markets Topic References

Course schedule Week 1

Week 2

The students must be able to

Week 3

draw schematically and explain the over-all financial system correctly Given a lot of examples. The students must be able to differentiate between direct and indirect finance and its involved institutions correctly The students must be able to know how the structure of the financial markets help in the economy The students must be able to appreciate and realize the importance of financial intermediaries compared to the security markets in providing funds to borrowers.

Structure of financial markets Chapter 2, Mishkin Financial market instruments Function of financial intermediaries and its importance Examples of financial intermediaries

week 4

Facts about financial structure Transaction costs: Its influence in the Financial structure; FIs and Transaction costs Asymmetric Information Lemons problems: Stock and Bond Markets How to solve adverse selection problems Moral Hazard:Debt and Equity Contracts The students must be able to How to solve Principal-Agent link the financial crisis and Problem its impact on the economy How to solve moral hazard in Debt contracts Financial Crisis and Its causes and impact on the economy The students must be able to Measuring interest rates know the concept of interest The concept of present value and rates and its role in the Yield to Maturity economy and each individual Bond Price and interest rate in the economy relationship Given various assets, students Current Yield must be able to decide Capital Gains maximally what financial Interest rates vs returns asset to buy or sell using the Real interest vs nominal interest rates as a criterion. Given so much money, the students must be able to decide what portfolio of assets to acquire in order to maximize returns; The students must be able to appreciate the importance of asset diversification Determinants of Asset Demand Portfolio Choice Benefits of Diversification Systematic vs unsystematic risk Asset Return and the Forex Market

Chap.8, Mishkin

Chapter 4, Mishkin

Week 5

Chapter 5, Mishkin Chapter 17, Mishkin

Week 6

Given a lot of factors, the students must be able to identify correctly what factors influence the behavior of interest rates The students must be able to integrate the relationship of the bond and money markets in influencing the behavior of interest rates.

Week 7

The students must be able to trace correctly the history of money perfectly The students must be able characterize money excellently. The students must be able to distinguish the motives for holding money The student must be able to determine how money supply is created Given an economic condition, the students must be able to know how to apply correctly the monetary policy.

Supply and demand in the bond market and its market equilibrium Factors affecting the supply and demand of bonds and its influence in the market equilibrium Supply and demand in the money market Money Market Equilibrium Factors affecting the supply and demand of money and its influence on the behavior of interest rates Evolution of money and the payment system Functions and Characteristics of money Demand of money M1, M2, M3 Supply of money and its determination : Players involved Monetary Base Monetary Equilibrium

Chapter 5, Mishkin

Chapter 3, Mishkin Chap 19, Mishkin

Week 8

Tools of MP The conduct of MP Transmission Mechanisms of MP The BSP, its role and function

Chap 15, 16, Mishkin

Week 9

The students must be able to trace the history of the banking system; The students must be able to outline correctly the evolution of the Phils. Banking system The students must be able to appreciate banking regulation The students must be able to appreciate the role of banks in the economy.

Evolution of the banking system in general Evolution of the Phils. Banking system The decline of traditional banking BSP data Chapter 12, Mishkin

Week 10

The students must be able to analyze correctly the behavior Balance Sheet of the banking system Basic Operation of a bank General principles of bank management How to Manage Credit risk Categories of banking regulation Managing interest rate risk Off balance Sheet activities Financial Innovation

Chapter 9, Mishkin

Week 11 Week 12

The students must be able to trace the relationship between money and inflation The students must be able to know the evolution of the international Financial system

2 views of inflation Keynesian and monetarist Budget deficit and inflation Gold Standard Bretton Woods and the IMF and WB

Chapter 24 Chap 18, Mishkin

Teaching methods & strategies

Lecture-demonstration, group work, presentation, workshop, games. Class requirements Activity 1. Long Exams (3 exams) 50% 2. Class Project ( Symposium, Field Trip 20% 3. Class Participation ( Presentations, Reports, Quizzes, assignments, etc) 30%

4. Passing Mark= 60% Class requirements details Bases for grading a) All reports are to be word- processed using Times font size 12 double space . b) Requirements not submitted on time will be penalized.

Grades will be based on the points earned: 1.0 = 50-49 1.25 = 48-47 1.50 = 46-44 1.75 = 43-41 2.25 = 38-36 2.50 = 35-33 2.75 = 32-31 3.00 = 30

2.00 = 40-39 Reading List

4.00 = below 30

Mishkin, Frederic S. The Economics of Money, Banking and Financial Markets, International ed. Dornbusch, R. and S. Fischer, Macroeconomics (latest edition) McGraw-Hill (DF) Simpson, Thomas, Money and Banking and econ Activity Chandler and Goldfield, Economics of Money and Banking

Class-pals

List below names of at least three classmates. Get the best modes of getting in touch with them in case you have concerns regarding the course. Phone/Fax/Cell Email Address

Name