Economics 311: Money and Banking

Developed by Professor Gerald Epstein and Tom Bernardin

Department of Economics | University of Massachusetts Amherst

Course Description

The Economics of Money and Banking investigates the role of financial instruments and institutions in the economy. Major topics include the determination of interest rates, the characteristics of bonds and stocks, the structure and regulation of the banking industry, the functions of a modern central bank, and the formulation and implementation of monetary policy. Students should complete the course with a solid understanding of the financial system and the role it plays in a market economy and with the ability to critically evaluate policy actions and other developments affecting the financial sector. 

The course will pay particular attention to the current financial and economic crisis. Students will leave the course with an understanding of the events that precipitated the crisis, the government’s response to the crisis, and the current debates surrounding the future of financial markets. Topics will include the role of exotic financial instruments, such as the CDO (collateralized debt obligation) and the CDS (credit default swap), the role of institutions such as The Fed (the Federal Reserve System) and the debate over financial regulation and restructuring, including a discussion of the Dodd-Frank financial reform legislation. 

Doing well in this course – in both senses of getting a good grade and gaining knowledge and insight from the course – will require that you stay involved: do the readings, look at the videos and study the power points, and participate in discussions. The more involved you are, the more you will learn and the better you will do. 

Is this course for you?

Navigating the course requires a basic understanding of internet browsing, email, and word processing. With these, you should have little trouble learning how to use UMassOnline – the learning management system. The online discussion component of the course provides the opportunity to develop your ideas in collaboration with others. 

Each component of the course includes one or more presentations, video lectures, and readings, demanding substantial effort over the term. This course involves a lot of written work and spreadsheet analysis. You will be required each week to post responses to discussion questions, to comment on others’ responses, to submit homework, and to take exams. At the end of the course there is a final exam composed of short answer and essay questions. Discussion questions must be completed in a timely manner if you are to receive full credit. Note that the discussions will close once the window for them has passed. If you have a heavy work schedule, this class may not be for you. 

Given the fast-paced nature of the course, deadlines for this course will be strictly enforced. Failure to meet scheduled requirements may put you at serious risk of failing the course – a significant waste of time, energy, and money. Also, please note that all deadlines for the course are according to Eastern Standard Time. 

If you have a documented learning disability, please contact the course instructor during the first week of class about accommodation. 

With the above points addressed, that’s it for technical details – read below for information on readings, information on how you will be evaluated, and finally, a class schedule. Good luck! Your instructor is here to help; you may email the instructor directly or post to the troubleshooting discussion board with any questions about the course – logistical, substantive, or otherwise.

Readings 

Many of the readings and videos, etc. can be downloaded or viewed from the course website. Two essential and required readings are not provided through the website. You must take responsibility for getting these books. 

1. The textbook 

Stephen G. Cecchetti and Kermit L. Schoenholtz, Money, Banking, and Financial Markets, 3rd edition, McGraw-Hill, Irwin.

There are two options for purchase:

1. You may buy the full print version, from a local bookseller, Amazon, etc.; or 
2. You may buy an ebook version, from http://create.mcgraw- hill.com/shop/ The purchase includes both a downloadable, printable copy as well as an online viewing copy of the textbook. 

2. This recent account of the crash 

Michael Lewis, The Big Short; Inside The Doomsday Machine. New York and London: W.W. Norton & Company, 2010. ISBN 978-0-393-33882-9 (paperback, c. $10).

Course Requirements and Grading System 

Your grade will depend on these activities:

• Midterm Exam 20%
• Final Exam 20%
• Problem Sets 25% | Approximately 20 questions, some spreadsheet based
• Discussions 25%  | 5 Discussion Questions (see below)
• Case Studies 10% | 2 Case Studies

Late work will be penalized (and beyond a certain point, not accepted). All assignments are openbook -- you will have access to readings and your own notes. However, the time constraint will make it difficult for you to answer the questions successfully if you have not completed the assigned readings.

In each Discussion, students should post at least one statement addressing the discussion question and respond substantively to at least one other student’s post. The grade for each discussion depends on posting, responding, and the quality of the content.

Grades

Grades will be assigned according to the following schedule.

Lower-Bound Grade Cut-offs (no rounding)

Good luck and enjoy the course!