THE ECONOMICS OF MONEY, BANKING AND FINANCIAL MARKETS, EUROPEAN EDITION

For courses in money and banking, or general economics. A unified framework for understanding financial markets The Economics of Money, Banking and Financial Markets brings a fresh perspective to today's major questions surrounding financial policy. Influenced by his term as Governor of the Federal Reserve, Frederic Mishkin offers students a unique viewpoint and informed insight into the monetary policy process, the regulation and supervision of the financial system, and the internationalization of financial markets. This edition, provides a unifying, analytic framework for learning that fits a wide variety of syllabi. Core economic principles and real-world examples organize students' thinking and keeps them motivated. MyLabT Economics is not included. Students, if MyLab Economics is a recommended/mandatory component of the course, please ask your instructor for the correct ISBN. MyLab Economics should only be purchased when required by an instructor. Instructors, contact your Pearson representative for more information. Reach every student by pairing this text with MyLab Economics MyLabT is the teaching and learning platform that empowers you to reach every student. By combining trusted author content with digital tools and a flexible platform, MyLab personalizes the learning experience and improves results for each student. Content: Preface Guided tour Authors??? acknowledgements Publisher???s acknowledgements Introduction ?? Part 1???? Introduction ?? 1 Why study money, banking and financial markets? Why study financial markets? Why study financial institutions and banking? Why study money and monetary policy? Why study international finance? How will we study money, banking and financial markets? Web exercises Concluding remarks Summary Key terms Questions and problems Web exercises Notes Web references Appendix to Chapter 1 Defining aggregate output, income, the price level and the inflation rate ?? 2 An overview of the financial system Function of financial markets Structure of financial markets Financial market instruments Internationalization of financial markets Function of financial intermediaries: indirect finance Types of financial intermediaries Regulation of the financial system Summary Key terms Questions and problems Web exercises Notes Web references ?? 3 What is money? A comparative approach to measuring money Meaning of money Functions of money Evolution of the payments system Measuring money Which is the most accurate monetary aggregate? Summary Key terms Questions and problems Web exercises Notes Web references ?? Part 2???? Financial markets ?? 4 Understanding interest rates Measuring interest rates The distinction between interest rates and returns The distinction between real and nominal interest rates Summary Key terms Questions and problems Web exercises Notes Web references ?? 5 The behaviour of interest rates Determinants of asset demand Supply and demand in the bond market Changes in equilibrium interest rates Supply and demand in the market for money: the liquidity preference framework Changes in equilibrium interest rates in the liquidity preference framework Summary Key terms Questions and problems Web exercises Notes Web references ?? 6 The risk and term structure of interest rates Risk structure of interest rates Term structure of interest rates Summary Key terms Questions and problems Web exercises Notes Web references ?? 7 The stock market, the theory of rational expectations and the efficient market hypothesis Computing the price of common stock How the market sets stock prices The theory of rational expectations The efficient market hypothesis: rational expectations in financial markets Behavioural finance Summary Key terms Questions and problems Web exercises Notes Web references ?? Part 3???? Financial institutions ?? 8 An economic analysis of financial structure Basic facts about financial structure throughout the world Transaction costs Asymmetric information: adverse selection and moral hazard The lemons problem: how adverse selection influences financial structure How moral hazard affects the choice between debt and equity contracts How moral hazard influences financial structure in debt markets Conflicts of interest Summary Key terms Questions and problems Web exercises Notes Web references ?? 9 Financial crises and the subprime meltdown Factors causing financial crises Dynamics of past financial crises in developed countries The subprime financial crisis of 2007???8 Dynamics of financial crises in emerging market economies Dynamics of the eurozone financial crisis Summary Key terms Questions and problems Web exercises Notes Web references ?? 10 ?? Banking and the management of financial institutions The bank balance sheet Basic banking General principles of bank management Managing credit risk Managing interest-rate risk Off-balance-sheet activities Summary Key terms Questions and problems Web exercises Notes Web references ?? 11 ?? Economic analysis of financial regulation Asymmetric information and financial regulation Advantages and disadvantages of bank regulation Banking crises throughout the world Whither financial regulation after the subprime financial crisis? Summary Key terms Questions and problems Web exercises Notes Web references ?? 12 ?? Banking industry: structure and competition The single banking market in Europe Competition and bank consolidation Financial innovation and the growth of the ???shadow banking system??? Structure of the European commercial banking industry International banking Summary Key terms Questions and problems Web exercises Notes Web references ?? Part 4???? Central banking ?? 13 ?? The goals and structure of central banks The price stability goal and the nominal anchor Other possible goals of monetary policy Should price stability be the primary goal of monetary policy? Structure of central banks The Bank of England The Federal Reserve System The European Central Bank Other central banks around the world Should the central banks be independent? Summary Key terms Questions and problems Web exercises Notes Web references ?? 14 ?? The money supply process Three players in the money creation process The central bank???s balance sheet Control of the monetary base Multiple deposit creation: a simple model The money multiplier Factors that determine the money supply Overview of the money creation process Limits of the central bank???s ability to control the money supply Summary Key terms Questions and problems Web exercises Notes Web references ?? 15 ?? The tools of monetary policy The market for reserves and the overnight interest rate Open market operations Standing facilities Reserve requirements Summary Key terms Questions and problems Web exercises Notes Web references ?? 16 ?? The conduct of monetary policy: strategy and tactics Monetary targeting Inflation targeting Monetary policy with an implicit nominal anchor Tactics: choosing the policy instrument Tactics: the Taylor rule Central banks??? response to asset-price bubbles: lessons from the subprime crisis Summary Key terms Questions and problems Web exercises Notes Web references ?? Part 5???? International finance and monetary policy ?? 17 ?? The foreign exchange market: exchange rates and applications Foreign exchange market Exchange rates in the long run Exchange rates in the short run: a supply and demand analysis Explaining changes in exchange rates Summary Key terms Questions and problems Web exercises Notes Web references Appendix to Chapter 17 ?? The interest parity condition ?? 18 ?? The international financial system Intervention in the foreign exchange market Balance of payments Exchange rate regimes in the international financial system Capital controls The role of the IMF International considerations and monetary policy To peg or not to peg: exchange-rate targeting as an alternative monetary policy strategy Currency boards, dollarization and monetary unions Summary Key terms Questions and problems Web exercises Notes Web references ?? Part 6???? Monetary theory ?? 19 ?? The demand for money Quantity theory of money Is velocity a constant? Keynes???s liquidity preference theory Further developments in the Keynesian approach Friedman???s modern quantity theory of money Distinguishing between the Friedman and Keynesian theories Empirical evidence on the demand for money Summary Key terms Questions and problems Web exercises Notes Web references ?? 20 ?? The ISLM model Determination of aggregate output The ISLM model ISLM approach to aggregate output and interest rates Summary Key terms Questions and problems Web exercises Notes Web references ?? 21 ?? Monetary and fiscal policy in the ISLM model Factors that cause the IS curve to shift Factors that cause the LM curve to shift Changes in equilibrium level of the interest rate and aggregate output Effectiveness of monetary versus fiscal policy ISLM models in the long run ISLM model and the aggregate demand curve Summary Key terms Questions and problems Web exercises Notes Web references ?? 22 ?? Aggregate demand and supply analysis Aggregate demand Aggregate supply Equilibrium in aggregate demand and supply analysis Summary Key terms Questions and problems Web exercises Notes Web references ?? 23 ?? Transmission mechanisms of monetary policy: the evidence Framework for evaluating empirical evidence Transmission mechanisms of monetary policy Lessons for monetary policy Summary Key terms Questions and problems Web exercises Notes Web references ?? 24 ?? Money and inflation Money and inflation: evidence Meaning of inflation Views of inflation Origins of inflationary monetary policy The discretionary/non-discretionary policy debate Summary Key terms Questions and problems Web exercises Notes Web references ?? 25 ?? Rational expectations: implications for policy The Lucas critique of policy evaluation New classical macroeconomic model New Keynesian model Comparison of the two new models with the traditional model Impact of the rational expectations revolution Summary Key terms Questions and problems Web exercises Notes Web references ?? Glossary Index Were you looking for the book with access to MyEconLab? This product is the book alone, and does NOT come with access to MyEconLab. This European adaptation takes Mishkin's market leading text The Economics of Money, Banking and Financial Markets a step further placing the central themes in context for European students. It provides an in-depth overview and comparison of the structures, goals, tools and strategies of the European Central Bank, the Bank of England and the US Federal Reserve. Mishkin's application of a unified analytical framework to the models makes theory intuitive for students whilst the rich array of current, real-world events keeps students motivated. Authoritative, comprehensive, and flexible, the text is easy to integrate into a wide variety of syllabi, and its ancillaries provide complete support when teaching the course. Frederic Mishkinstudied at MIT and has taught at Columbia Business School since 1983. He was a member of the Board of Governors of the Federal Reserve System from 2006 to 2008 and has been a consultant to the World Bank, the Inter-American Development Bank, and the International Monetary Fund, as well as to numerous central banks throughout the world Kent Matthewsis the Sir Julian Hodge Professor of Banking and Finance at the Cardiff Business School. He is a graduate of the London School of Economics, Birkbeck and Liverpool University and has held research posts at the LSE, National Institute of Economic & Social Research and Bank of England. Massimo Giuliodori took his first degree at the University of Ancona (Italy) and his MSc in Economics and Finance at the University of Glasgow. After obtaining his PhD from the Scottish Doctoral Programme, he moved to the Amsterdam School of Economics of the University of Amsterdam, where he is now Associate Professor.