26035 Money and Banking, 5 cr
This course has two parts. The first part deals with microeconomics of financial intermediation. It emphasizes the role of asymmetric information in credit markets. It explores the central theories of financial intermediation and regulation thereof. The second part concentrates on the transmission of monetary policy through the banking system. It first discusses the objectives of monetary and macroprudential policy in the presence of both nominal and financial frictions. It then introduces tools available to central banks and regulatory authorities for achieving these objectives such as the conventional policy rate, quantitative easing and capital requirements. The course will focus on the following issues:
- adverse selection and moral hazard in credit market
- implications of asymmetric information in banking market relationship lending and bank monitoring
- screening and the use of collateral in bank lending
- bank competition and financial stability
- bank runs, deposit insurance and systematic risk
- securitization and the subprime crisis
- the regulation of banks
- nominal financial and monetary policy
- the transmission of conventional monetary policy through the banking system
- unconventional monetary policy, quantitative easing and forward guidance
- financial frictions and macroprudential policy
- bank capital regulation
You have an analytic perspective on crucial issues in modern banking with a particular emphasis on the implications of asymmetric information and are familiar with the topical issues related to European bank regulation. You understand the central role of the banking system in the transmission of monetary policy, the goals of central banks and the tools available for achieving them. You also understand the current exceptional policy environment and the key difficulties that it entails.
• assess the implications of asymmetric information for credit market efficiency
• analyze and propose solutions to problems caused by informational asymmetry in credit markets.
• assess the role of banks in an economy and their vulnerability to crises
• assess the goals and limitations of bank regulation
• analyze the topical issues related to financial intermediaries and their regulation
• participate in the debates concerning financial crisis and bank regulation analytically
• understand the roles of monetary and macroprudential policy
• assess the effects of key policy tools and their limitations.
A completed intermediate level course in microeconomics, a completed course in econometrics.
134 hours divided into
Scheduled (contact) hours: 30 h
Non-scheduled work: 104 h
Lectures and individual assignment.
• Freixas, X. & Rochet, J.-C. (2008). Microeconomics of banking. 2nd Edition. Cambridge, Mass: MIT Press.
Students who have completed the course Banking and Finance (8 ECTS, course code 2688) cannot take this course.
Open university quota: 3
Quota for JOO-students: 3