(Course tought together with Casper de Vries / Yvonne Adema)
Short description:
In this course we will discuss the essentials of financial systems and financial institutions. For example, in the modern theory of financial intermediation, information about risks is crucial. Intermediaries exist primarily because certain information is not traded. The structure of the banking and insurance industry can be explained for a large part with this key insight. Sharing and pooling of risk and risk management play a central role, with key concepts being information problems, moral hazard, adverse selection, Value-at-Risk systems, etc.
The main topics of this course are:
Required reading:
Matthews & Thompson, The Economics of Banking, Wiley.
I provide these course materials (lecture notes, slides, etc.) because I think they may contain useful information for anyone interested in the particular topics. My teaching has never followed a particular single textbook, but covers a careful selection of materials from various sources (multiple textbooks and academic papers). Sometimes this yields material that is decidedly more difficult than most textbooks would accept, but I think empirically more correct and academically more insightful.
Period 3, January-February 2011
My written lecture notes for students contain the stories I tell and provide some more technical details and references.
Exercises/Assignments:
Usually I ask students to examine empirically the relationship between economic growth and characteristics of the financial system, such as the size of financial intermediation and stock markets.
Supplementary required reading:
* Levine (1997) Financial development and economic growth: Views and agenda, Journal of Economic Literature
http://ideas.repec.org/a/aea/jeclit/v35y1997i2p688-726.html
* Merton (1995) A functional perspective of financial intermediation, Financial Management
Older material used in previous editions of this course