Money and Finance

Moneta e Finanza

2023-24

Course outline

Overview of the monetary and financial system
The roles of money
The risk and term structure of interest rates
Fundamental pricing of assets
Financial frictions
Credit, financial intermediation, and money
Modern monetary economics
Liquidity, leverage, and the financial cycle
Financial crises, systemic risk, and financial regulation
Macro-prudential policy and monetary policy implementation
Exchange rates and interest rates
Digitalization, tokenisation, and the roles of money

Readings

There is no textbook for this course. The study material for each topic is given by the articles, data, videos and slides, as detailed below. For introductory or background reading you might want to pick one of the following optional textbooks:

Frederic S. Mishkin (2018). The Economics of Money, Banking, and Financial Markets. 12th edition, Pearson.
Stephen G. Cecchetti and Kermit L. Schoenholtz (2021). Money, Banking and Financial Markets. 6th edition, McGraw Hill.

Homework assignments and class presentations

In the second half of the term, students will agree with the teacher the subject for an individual written homework. The essay will analyze in an applied, data-based perspective (i.e., students must gather and analyze data), one topic in monetary and financial economics, using the tools learned during the coursework. Students are encouraged to discuss and define the topic well in advance of the final examination.

THE WRITTEN EXAM WILL CONSIST OF THREE OPEN-ENDED QUESTIONS TO BE ANSWERED IN A 1.5 HOUR-SESSION ON THE DAY OF THE EXAM.
THE DAY BEFORE, EACH STUDENT WILL HAVE TO SEND HER/HIS HOMEWORK ESSAY (A PDF FILE PLUS SPREADSHEETS WITH DATA AND ANALYTICS IF EMPLOYED) TO THE TEACHER'S E-MAIL ADDRESS.

Grading

The overall grade is based on the following weighting scheme:

Homework assignment: 50%
Final written examination (closed book): 50%

Detailed contents and study resources

1. Overview of the monetary and financial system

2. The roles of money

3. The risk and term structure of interest rates

Data: https://www.ecb.europa.eu/stats/financial_markets_and_interest_rates/html/index.en.html
Data: https://fred.stlouisfed.org/graph/?g=7Xhv
Data: https://fred.stlouisfed.org/graph/?g=7Xkw
Data: fred.stlouisfed.org/graph/?g=UyH7
Data: https://www.nber.org/research/business-cycle-dating
Data: https://www.newyorkfed.org/research/capital_markets/ycfaq.html#/overview
Video: https://www.youtube.com/watch?v=cfKzEbGsc68
P. Veronesi (2016). Handbook of Fixed Income Securities (Chapter 1). Wiley Handbooks.
Kim, D and A Orphanides (2007). The bond market term premium: what is it, and how can we measure it? BIS Quarterly Review, June, pp 27-40.

4. Fundamental pricing of assets

Data: http://www.econ.yale.edu/~shiller/data.htm
Data: https://www.bis.org/statistics/derstats.htm
F. F. Schwartzman (2014). How Can Consumption-Based Asset-Pricing Models Explain Low Interest Rates? Federal Reserve Bank of Richmond Economic Quarterly, 100, 3, 209-240.

5. Financial frictions

Hall, R. E. (2010). “Why Does the Economy Fall to Pieces after a Financial Crisis?” Journal of Economic Perspectives, 24 (4): 3–20.

6. Credit, financial intermediation, and money

Data: https://www.ecb.europa.eu/mopo/implement/app/html/index.en.html
Video: https://www.youtube.com/watch?v=CvRAqR2pAgw
Video: https://youtu.be/_I5-hQRDnus
M. McLeay, A. Radia and R. Thomas (2014). Money creation in the modern economy. Bank of England Quarterly Bulletin 2014 Q1.

7. Modern monetary economics

Video: https://www.youtube.com/watch?v=80j790J97l8&t=18s
R. Lagos (2006). Inside and outside money. Federal Reserve Bank of Minneapolis, Research Department Staff Report 374.
N. Kiyotaki and J. Moore (2019). Liquidity, Business Cycles, and Monetary Policy. Journal of Political Economy, vol. 127(6), pages 2926-2966.

8. Liquidity, leverage, and the financial cycle