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Finance, Banking, and Money

Table of Contents

• About the Authors

• Acknowledgments

• Preface

• Chapter 1: Money, Banking, and Your World

  • Chapter Introduction
  • Dreams Dashed
  • Hope Springs
  • Suggested Browsing
  • Suggested Reading

• Chapter 2: The Financial System

  • Chapter Introduction
  • Evil and Brilliant Financiers?
  • Financial Systems
  • Asymmetric Information: The Real Evil
  • Financial Markets
  • Financial Intermediaries
  • Competition Between Markets and Intermediaries
  • Regulation
  • Suggested Reading

• Chapter 3: Money

  • Chapter Introduction
  • Of Love, Money, and Transactional Efficiency
  • Better to Have Had Money and Lost It Than to Have Never Had Money at All
  • A Short History of Moolah
  • Commodity and Credit Monies
  • Measuring Money
  • Suggested Reading

• Chapter 4: Interest Rates

  • Chapter Introduction
  • The Interest of Interest
  • Present and Future Value
  • Compounding Periods
  • Pricing Debt Instruments
  • What’s the Yield on That?
  • Calculating Returns
  • Inflation and Interest Rates
  • Suggested Reading

• Chapter 5: The Economics of Interest-Rate Fluctuations

  • Chapter Introduction
  • Interest Rate Fluctuations
  • Shifts in Supply and Demand for Bonds
  • Liquidity Preference
  • Predictions and Effects
  • Suggested Reading

• Chapter 6: The Economics of Interest-Rate Spreads and Yield Curves

  • Chapter Introduction
  • A Short History of Interest Rates
  • Interest-Rate Determinants I: The Risk Structure
  • The Determinants of Interest Rates II: The Term Structure
  • Suggested Reading

• Chapter 7: Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities

  • Chapter Introduction
  • The Theory of Rational Expectations
  • Valuing Corporate Equities
  • Financial Market Efficiency
  • Evidence of Market Efficiency
  • Suggested Reading

• Chapter 8: Financial Structure, Transaction Costs, and Asymmetric Information

  • Chapter Introduction
  • The Sources of External Finance
  • Transaction Costs, Asymmetric Information, and the Free-Rider Problem
  • Adverse Selection
  • Moral Hazard
  • Agency Problems
  • Suggested Reading

• Chapter 9: Bank Management

  • Chapter Introduction
  • The Balance Sheet
  • Assets, Liabilities, and T-Accounts
  • Bank Management Principles
  • Credit Risk
  • Interest-Rate Risk
  • Off the Balance Sheet
  • Suggested Reading

• Chapter 10: Innovation and Structure in Banking and Finance

  • Chapter Introduction
  • Early Financial Innovations
  • Innovations Galore
  • Loophole Mining and Lobbying
  • Banking on Technology
  • Banking Industry Profitability and Structure
  • Suggested Reading

• Chapter 11: The Economics of Financial Regulation

  • Chapter Introduction
  • Public Interest versus Private Interest
  • The Great Depression as Regulatory Failure
  • The Savings and Loan Regulatory Debacle
  • Better but Still Not Good: U.S. Regulatory Reforms
  • Basel II’s Third Pillar
  • Suggested Reading

• Chapter 12: The Financial Crisis of 2007–2009

  • Chapter Introduction
  • Financial Crises
  • Asset Bubbles
  • Financial Panics
  • Lender of Last Resort
  • Bailouts
  • The Crisis of 2007–2008
  • Suggested Reading

• Chapter 13: Central Bank Form and Function

  • Chapter Introduction
  • America’s Central Banks
  • The Federal Reserve System’s Structure
  • Other Important Central Banks
  • Central Bank Independence
  • Suggested Reading

• Chapter 14: The Money Supply Process

  • Chapter Introduction
  • The Central Bank’s Balance Sheet
  • Open Market Operations
  • A Simple Model of Multiple Deposit Creation
  • Suggested Reading

• Chapter 15: The Money Supply and the Money Multiplier

  • Chapter Introduction
  • A More Sophisticated Money Multiplier for M1
  • The M2 Money Multiplier
  • Summary and Explanation
  • Suggested Reading

• Chapter 16: Monetary Policy Tools

  • Chapter Introduction
  • The Federal Funds Market and Reserves
  • Open Market Operations and the Discount Window
  • The Monetary Policy Tools of Other Central Banks
  • Suggested Reading

• Chapter 17: Monetary Policy Targets and Goals

  • Chapter Introduction
  • A Short History of Fed Blunders
  • Central Bank Goal Trade-offs
  • Central Bank Targets
  • The Taylor Rule
  • Suggested Reading

• Chapter 18: Foreign Exchange

  • Chapter Introduction
  • The Economic Importance of Currency Markets
  • Determining the Exchange Rate
  • Long-Run Determinants of Exchange Rates
  • Short-Run Determinants of Exchange Rates
  • Modeling the Market for Foreign Exchange
  • Suggested Reading

• Chapter 19: International Monetary Regimes

  • Chapter Introduction
  • The Trilemma, or Impossible Trinity
  • Two Systems of Fixed Exchange Rates
  • The Managed or Dirty Float
  • The Choice of International Policy Regime
  • Suggested Reading

• Chapter 20: Money Demand

  • Chapter Introduction
  • The Quantity Theory
  • Liquidity Preference Theory
  • Head to Head: Friedman versus Keynes
  • Suggested Reading

• Chapter 21: IS-LM

  • Chapter Introduction
  • Aggregate Output and Keynesian Cross Diagrams
  • The IS-LM Model
  • Suggested Reading

• Chapter 22: IS-LM in Action

  • Chapter Introduction
  • Shifting Curves: Causes and Effects
  • Implications for Monetary Policy
  • Aggregate Demand Curve
  • Suggested Reading

• Chapter 23: Aggregate Supply and Demand, the Growth Diamond, and Financial Shocks

  • Chapter Introduction
  • Aggregate Demand
  • Aggregate Supply
  • Equilibrium Analysis
  • The Growth Diamond
  • Financial Shocks
  • Suggested Reading

• Chapter 24: Monetary Policy Transmission Mechanisms

  • Chapter Introduction
  • Modeling Reality
  • How Important Is Monetary Policy?
  • Transmission Mechanisms
  • Suggested Reading

• Chapter 25: Inflation and Money

  • Chapter Introduction
  • Empirical Evidence of a Money-Inflation Link
  • Why Have Central Bankers So Often Gotten It Wrong?
  • Suggested Reading

• Chapter 26: Rational Expectations Redux: Monetary Policy Implications

  • Chapter Introduction
  • Rational Expectations
  • New Keynesians
  • Inflation Busting
  • Suggested Reading