Cucked Abroad: The Making of a Cuckold

Cecchetti & Schoenholtz's Money, Banking, and Financial Markets 6e stays relevant and interesting through the product’s unique emphasis on the Five Core Principles, the early introduction of risk, an integrated global perspective, and the integration of FRED data in both the text and problem material. By focusing on the big picture via core principles, Cecchetti teaches students the rationale for financial rules and institutional structure so that even when the financial system evolves, students' knowledge will not be out of date. Be sure to visit the author blog at www.moneyandbanking.com for short, informed discussions on issues in the news, as well as technical points relevant for instructors and students alike. Connect Economics: McGraw-Hill's online assignment and assessment tool. Cecchetti paired with Connect Economics provides assignable, auto-gradable versions of end-of-chapter problems in static and algorithmic format, as well as test bank content and graphing problems. Students receive detailed step-by-step feedback on assignments and assignable content is fully integrated with the eBook.Students are also able to search, highlight, and take notes within the ReadAnywhere eBook and complete SmartBook 2.0 assignments offline. Connect provides instructors with powerful reporting tools allowing them to plan,track, and analyze student performance across learning outcomes. Cover Title Page Copyright Page Dedication About the Authors Preface Learning Tools Walkthrough Acknowledgments Brief Contents Contents Part I Money and the Financial System CHAPTER 1 AN INTRODUCTION TO MONEY AND THE FINANCIAL SYSTEM The Six Parts of the Financial System The Five Core Principles of Money and Banking Core Principle 1: Time Has Value Core Principle 2: Risk Requires Compensation Core Principle 3: Information Is the Basis for Decisions Core Principle 4: Markets Determine Prices and Allocate Resources Core Principle 5: Stability Improves Welfare Special Features of This Book Your Financial World Applying the Concept Lessons from the Crisis Money and Banking Blog Tools of the Trade End-of-Chapter Sections The Organization of This Book Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration Appendix A to Chapter 1: Measuring Economic Activity, Prices, and the Inflation Rate Appendix B to Chapter 1: Using FRED CHAPTER 2 MONEY AND THE PAYMENTS SYSTEM Money and How We Use It Means of Payment Unit of Account Store of Value The Payments System Commodity and Fiat Monies Checks Electronic Payments The Future of Money Measuring Money Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 3 FINANCIAL INSTRUMENTS, FINANCIAL MARKETS, AND FINANCIAL INSTITUTIONS Financial Instruments Uses of Financial Instruments Characteristics of Financial Instruments: Standardization and Information Underlying versus Derivative Instruments A Primer for Valuing Financial Instruments Examples of Financial Instruments Financial Markets The Role of Financial Markets The Structure of Financial Markets Characteristics of a Well-Run Financial Market Financial Institutions The Role of Financial Institutions The Structure of the Financial Industry Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration Part II Interest Rates, Financial Instruments, and Financial Markets CHAPTER 4 FUTURE VALUE, PRESENT VALUE, AND INTEREST RATES Valuing Monetary Payments Now and in the Future Future Value and Compound Interest Present Value Applying Present Value Internal Rate of Return Bonds: The Basics Real and Nominal Interest Rates Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration Appendix to Chapter 4: The Algebra of Present-Value Formulas CHAPTER 5 UNDERSTANDING RISK Defining Risk Measuring Risk Possibilities, Probabilities, and Expected Value Measures of Risk Risk Aversion, the Risk Premium, and the Risk-Return Tradeoff Sources of Risk: Idiosyncratic and Systematic Risk Reducing Risk through Diversification Hedging Risk Spreading Risk Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration Appendix to Chapter 5: The Mathematics of Diversification CHAPTER 6 BONDS, BOND PRICES, AND THE DETERMINATION OF INTEREST RATES Bond Prices Zero-Coupon Bonds Fixed-Payment Loans Coupon Bonds Consols Bond Yields Yield to Maturity Current Yield Holding Period Returns The Bond Market and the Determination of Interest Rates Bond Supply, Bond Demand, and Equilibrium in the Bond Market Factors That Shift Bond Supply Factors That Shift Bond Demand Understanding Changes in Equilibrium Bond Prices and Interest Rates Why Bonds Are Risky Default Risk Inflation Risk Interest Rate Risk Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 7 THE RISK AND TERM STRUCTURE OF INTEREST RATES Ratings and the Risk Structure of Interest Rates Bond Ratings Commercial Paper Ratings The Impact of Ratings on Yields Differences in Tax Status and Municipal Bonds The Term Structure of Interest Rates The Expectations Hypothesis The Liquidity Premium Theory The Information Content of Interest Rates Information in the Risk Structure of Interest Rates Information in the Term Structure of Interest Rates Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 8 STOCKS, STOCK MARKETS, AND MARKET EFFICIENCY The Essential Characteristics of Common Stock Measuring the Level of the Stock Market The Dow Jones Industrial Average The Standard & Poor’s 500 Index Other U.S. Stock Market Indexes World Stock Indexes Valuing Stocks Fundamental Value and the Dividend-Discount Model Why Stocks Are Risky Risk and the Value of Stocks The Theory of Efficient Markets Investing in Stocks for the Long Run The Stock Market’s Role in the Economy Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 9 DERIVATIVES: FUTURES, OPTIONS, AND SWAPS The Basics: Defining Derivatives Forwards and Futures Margin Accounts and Marking to Market Hedging and Speculating with Futures Arbitrage and the Determinants of Futures Prices Options Calls, Puts, and All That: Definitions Using Options Pricing Options: Intrinsic Value and the Time Value of the Option The Value of Options: Some Examples Swaps Interest Rate Swaps Credit Default Swaps Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 10 FOREIGN EXCHANGE Foreign Exchange Basics The Nominal Exchange Rate The Real Exchange Rate Foreign Exchange Markets Exchange Rates in the Long Run The Law of One Price Purchasing Power Parity Exchange Rates in the Short Run The Supply of Dollars The Demand for Dollars Equilibrium in the Market for Dollars Shifts in the Supply of and Demand for Dollars Explaining Exchange Rate Movements Government Policy and Foreign Exchange Intervention Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration Appendix to Chapter 10: Interest Rate Parity and Short-Run Exchange Rate Determination Part III Financial Institutions CHAPTER 11 THE ECONOMICS OF FINANCIAL INTERMEDIATION The Role of Financial Intermediaries Pooling Savings Safekeeping, Payments System Access, and Accounting Providing Liquidity Diversifying Risk Collecting and Processing Information Information Asymmetries and Information Costs Adverse Selection Solving the Adverse Selection Problem Moral Hazard: Problem and Solutions Financial Intermediaries and Information Costs Screening and Certifying to Reduce Adverse Selection Monitoring to Reduce Moral Hazard Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 12 DEPOSITORY INSTITUTIONS: BANKS AND BANK MANAGEMENT The Balance Sheet of Commercial Banks Assets: Uses of Funds Liabilities: Sources of Funds Bank Capital and Profitability Off-Balance-Sheet Activities Bank Risk: Where It Comes from and What to Do about It Liquidity Risk Credit Risk Interest Rate Risk Trading Risk Cyber Risk and Other Operational Risks Other Risks Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 13 FINANCIAL INDUSTRY STRUCTURE Banking Industry Structure A Short History of U.S. Banking Competition and Consolidation The Globalization of Banking The Future of Banks Nondepository Institutions Insurance Companies Pension Funds Securities Firms: Brokers, Mutual Funds, and Investment Banks Finance Companies Government-Sponsored Enterprises Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 14 REGULATING THE FINANCIAL SYSTEM The Sources and Consequences of Runs, Panics, and Crises The Government Safety Net The Unique Role of Banks and Shadow Banks The Government as Lender of Last Resort Government Deposit Insurance Problems Created by the Government Safety Net Regulation and Supervision of the Financial System Restrictions on Competition Asset Holding Restrictions and Minimum Capital Requirements Disclosure Requirements Supervision and Examination Stress Tests Evolving Challenges for Regulators and Supervisors Micro-Prudential versus Macro-Prudential Regulation Regulatory Reform: The Dodd-Frank Act of 2010 Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration Part IV Central Banks, Monetary Policy, and Financial Stability CHAPTER 15 CENTRAL BANKS IN THE WORLD TODAY The Basics: How Central Banks Originated and Their Role Today The Government’s Bank The Bankers’ Bank Stability: The Primary Objective of All Central Banks Low, Stable Inflation High, Stable Real Growth Financial System Stability Interest Rate and Exchange Rate Stability Meeting the Challenge: Creating a Successful Central Bank The Need for Independence The Need for Accountability and Transparency The Policy Framework, Policy Tradeoffs, and Credibility Decision Making by Committee Fitting Everything Together: Central Banks and Fiscal Policy Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 16 THE STRUCTURE OF CENTRAL BANKS: THE FEDERAL RESERVE AND THE EUROPEAN CENTRAL BANK The Structure of the Federal Reserve System The Federal Reserve Banks The Board of Governors The Federal Open Market Committee Assessing the Federal Reserve System’s Structure Independence from Political Influence Decision Making by Committee Accountability and Transparency Policy Framework The European Central Bank Organizational Structure Accountability and Transparency The Price Stability Objective and Monetary Policy Strategy Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 17 THE CENTRAL BANK BALANCE SHEET AND THE MONEY SUPPLY PROCESS The Central Bank’s Balance Sheet Assets Liabilities The Importance of Disclosure The Monetary Base Changing the Size and Composition of the Balance Sheet Open Market Operations Foreign Exchange Intervention Discount Loans Cash Withdrawal The Deposit Expansion Multiplier Deposit Creation in a Single Bank Deposit Expansion in a System of Banks The Monetary Base and the Money Supply Deposit Expansion with Excess Reserves and Cash Withdrawals The Arithmetic of the Money Multiplier The Limits of the Central Bank’s Ability to Control the Quantity of Money Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 18 MONETARY POLICY: STABILIZING THE DOMESTIC ECONOMY The Federal Reserve’s Conventional Policy Toolbox The Target Federal Funds Rate and the Interest on Excess Reserves Discount Lending, the Lender of Last Resort, and Crisis Management Reserve Requirements Operational Policy at the European Central Bank The ECB’s Target Interest Rate and Open Market Operations The Marginal Lending Facility The Deposit Facility Reserve Requirements Linking Tools to Objectives: Making Choices Desirable Features of a Policy Instrument Inflation Targeting A Guide to Central Bank Interest Rates: The Taylor Rule Unconventional Policy Tools Forward Guidance Quantitative Easing Targeted Asset Purchases Making an Effective Exit Concluding Remarks Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration Appendix to Chapter 18: Monetary Policy Operations and the Reverse Repo Rate CHAPTER 19 EXCHANGE RATE POLICY AND THE CENTRAL BANK Linking Exchange Rate Policy with Domestic Monetary Policy Inflation and the Long-Run Implications of Purchasing Power Parity Interest Rates and the Short-Run Implications of Capital Market Arbitrage Capital Controls and the Policymakers’ Choice Mechanics of Exchange Rate Management The Central Bank’s Balance Sheet Sterilized Intervention The Costs, Benefits, and Risks of Fixed Exchange Rates Assessing the Costs and Benefits The Danger of Speculative Attacks Summarizing the Case for a Fixed Exchange Rate Fixed Exchange Rate Regimes Exchange Rate Pegs and the Bretton Woods System Hard Pegs: Currency Boards and Dollarization Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration Appendix to Chapter 19: What You Really Need to Know about the Balance of Payments Part V Modern Monetary Economics CHAPTER 20 MONEY GROWTH, MONEY DEMAND, AND MODERN MONETARY POLICY Why We Care about Monetary Aggregates The Quantity Theory and the Velocity of Money Velocity and the Equation of Exchange The Quantity Theory of Money The Facts about Velocity The Demand for Money The Transactions Demand for Money The Portfolio Demand for Money Targeting Money Growth in a Low-Inflation Environment The Instability of U.S. Money Demand Targeting Money Growth: The Fed and the ECB Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 21 OUTPUT, INFLATION, AND MONETARY POLICY Output and Inflation in the Long Run Potential Output Long-Run Inflation Monetary Policy and the Dynamic Aggregate Demand Curve Aggregate Expenditure and the Real Interest Rate Inflation, the Real Interest Rate, and the Monetary Policy Reaction Curve The Dynamic Aggregate Demand Curve Aggregate Supply Short-Run Aggregate Supply Shifts in the Short-Run Aggregate Supply Curve The Long-Run Aggregate Supply Curve Equilibrium and the Determination of Output and Inflation Short-Run Equilibrium Adjustment to Long-Run Equilibrium The Sources of Fluctuations in Output and Inflation What Causes Recessions? Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration Appendix to Chapter 21: The Dynamic Aggregate Demand–Aggregate Supply Model CHAPTER 22 UNDERSTANDING BUSINESS CYCLE FLUCTUATIONS Sources of Fluctuations in Output and Inflation Shifts in the Dynamic Aggregate Demand Curve Shifts in the Short-Run Aggregate Supply Curve Using the Aggregate Demand–Aggregate Supply Framework How Do Policymakers Achieve Their Stabilization Objectives? What Accounts for the Great Moderation? What Happens When Potential Output Changes? What Are the Implications of Globalization for Monetary Policy? Can Policymakers Stabilize Output and Inflation Simultaneously? Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration CHAPTER 23 MODERN MONETARY POLICY AND THE CHALLENGES FACING CENTRAL BANKERS The Monetary Policy Transmission Mechanism The Traditional Channels: Interest Rates and Exchange Rates Bank-Lending and Balance-Sheet Channels Asset-Price Channels: Wealth and Investment Financial Crises and the Transmission of Monetary Policy The Challenges Modern Monetary Policymakers Face Booms and Busts in Property and Equity Prices Deflation and the Effective Lower Interest Rate Bound The Evolving Structure of the Financial System Key Terms Using FRED: Codes for Data in This Chapter Chapter Lessons Conceptual and Analytical Problems Data Exploration Glossary Notation Index Index HE Business Econom Cecchetti& Schoenholtz's Money, Banking, and Financial Markets 6estays relevant and interesting through the product's unique emphasis on theFive Core Principles, the early introduction of risk, an integrated globalperspective, and the integration of FRED data in both the text and problemmaterial. By focusing on the big picture via core principles, Cecchetti teachesstudents the rationale for financial rules and institutional structure so thateven when the financial system evolves, students' knowledge will not be out ofdate. Be sure to visit the author blog at www.moneyandbanking.com for short, informed discussions onissues in the news, as well as technical points relevant for instructors andstudents alike.ConnectEconomics: McGraw-Hill's online assignment and assessment tool. Cecchettipaired with Connect Economics provides assignable, auto-gradable versions ofend-of-chapter problems in static and algorithmic format, as well as test bankcontent and graphing problems. Students receive detailed step-by-step feedbackon assignments and assignable content is fully integrated with the eBook.Students are also able to search, highlight, and take notes within theReadAnywhere eBook and complete SmartBook 2.0 assignments offline. Connectprovides instructors with powerful reporting tools allowing them to plan,track, and analyze student performance across learning outcomes