MGT411 - Money & Banking - Lecture Handout 01

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TEXT AND REFERENCE MATERIAL &
FIVE PARTS OF THE FINANCIAL SYSTEM

The Primary textbook for the course will be

  • “Money, Banking and Financial Markets” by Stephan G. Cecchetti
    International Edition, McGraw Hill Publishers, ISBN 0-07-111565-X”

Reference books will be

  • The Economics of Money, Banking and Financial Markets”, by Fredrick S. Mishkin 7th Edition Addison Wesley Longman Publishers
  • “Principles of Money, Banking and Financial Markets” by Lawrence S. Ritter, Willaim L. Silber and Gregory F. Udell, Addison Wesley Longman Publishers

Course Contents

  • Money and the Financial System
  • Money and the Payments System
  • Financial Instruments, Financial Markets, and Financial Institutions
  • Interest rate, financial instruments and financial markets
  • Future Value, Present Value and Interest Rates
  • Understanding Risk
  • Bonds, Pricing and Determination of Interest Rates
  • The Risk and Term Structure of Interest Rates
  • Stocks, Stock Markets and Market Efficiency
  • Financial Institutions
  • Economics of Financial Intermediation
  • Depositary Institutions: Banks and bank Management
  • Financial Industry Structure
  • Regulating the financial system
  • Central Banks, Monetary Policy and Financial stability
  • Structure of central banks
  • Balance sheet and Money Supply process
  • Monetary policy
  • Exchange rate policy
  • Modern Monetary Economics
  • Money growth and Money Demand
  • Aggregate demand
  • Business Cycle
  • Output and inflation in the short run
  • Money and Banking in Islam
  • Monetary and financial policy and structure for an Interest-free economy
  • Islamic Banking in the contemporary world

Five Parts of the Financial System

  • Money
  • Financial Instruments
  • Financial Markets
  • Financial Institutions
  • Central Banks

1. Money

  • To pay for purchases
  • To store wealth
  • Evolved from gold and silver coins to paper money to today’s electronic funds transfers
  • Traditional Paycheck system vs. ATM Withdrawals and Mailed transactions vs. E-banking

2. Financial Instruments

  • To transfer wealth from savers to borrowers
  • To transfer risk to those best equipped to bear it.
  • Once investing was an activity reserved for the wealthy
  • Costly individual stock transactions through stockbrokers
  • Information collection was not so easy
  • Now, small investors have the opportunity to purchase shares in “mutual funds.”

3. Financial Markets

  • To buy and sell financial instruments quickly and cheaply
  • Evolved from coffeehouses to trading places (Stock exchanges) to electronic networks
  • Transactions are much more cheaper now
  • Markets offer a broader array of financial instruments than were available even 50 years ago

4. Financial Institutions

  • Provide access to financial markets
  • Banks evolved from Vaults and developed into deposits- and loans-agency
  • Today’s banks are more like financial supermarkets offering a huge assortment of financial products and services for sale.
  • Access to financial markets
  • Insurance
  • Home- and car-loans
  • Consumer credit
  • Investment advice

5. Central Banks

  • Monitors financial Institutions
  • Stabilizes the Economy
  • Initiated by Monarchs to finance the wars
  • The govt. treasuries have evolved into the modern central bank
  • Control the availability of money and credit in such a way as to ensure
  • Low inflation,
  • High growth, and
  • The stability of the financial system
  • State Bank of Pakistan www.sbp.org.pk

Summary

Five Parts of the Financial System

  • Money
  • Financial Instruments
  • Financial Markets
  • Financial Institutions
  • Central Banks

Related Content: MGT411 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Money & Banking