Principles of Money, Banking & Financial Markets

by Ritter, Lawrence S.; Silber, William L.; Udell, Gregory F.

• ISBN13: 9780321339195
• ISBN10: 0321339193
• Edition: 12th
• Format: Hardcover
• Copyright: 2008-09-17
• Publisher: Pearson

Summary

Well-known for its engaging, conversational style, this text makes sophisticated concepts accessible, introducing students to how markets and institutions shape the global financial system and economic policy.Principles of Money, Banking, & Financial Marketsincorporates current research and data while taking stock of sweeping changes in the international financial landscape produced by financial innovation, deregulation, and geopolitical considerations. The Basics:Introducing Money, Banking, and Financial Markets; The Role of Money in the Macroeconomy; Financial Instruments, Markets, and Institutions.Financial Instruments and Markets:Interest Rate Measurement and Behavior; The Term and Risk Structure of Interest Rates; The Structure and Performance of Securities Markets; The Pricing of Risky Financial Assets; Money and Capital Markets; Demystifying Derivatives; Understanding Foreign Exchange.Banks and Other Intermediaries:The Nature of Financial Intermediation; Depository Financial Institutions; Nondepository Financial Institutions.Financial System Architecture:Understanding Financial Contracts; The Regulation of Markets and Institutions; Financial System Design.The Art of Central Banking:Who's In Charge Here?; Bank Reserves and the Money Supply; The Instruments of Central Banking; Understanding Movements in Bank Reserves; Monetary Policy Strategy.Monetary Theory:The Classical Foundations; The Keynesian Framework; TheISLMWorld; Money and Economic Stability in theISLMWorld; An Aggregate Supply and Demand Perspective on Money and Economic Stability; Rational Expectations: Theory and Policy Implications; Empirical Evidence on the Effectiveness of Monetary Policy.Grand Finale:Tying It All Together. For all readers interested in money, banking, and financial markets.

Author Biography

Lawrence S. Ritter (late) was Professor of Finance and Economics Emeritus at the Stern School of Business of New York University. A former Chief of the Domestic Research Division of the Federal Reserve Bank of New York, he served as a consultant to the U.S. Treasury, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the American Bankers Association, the Association of Reserve City Bankers, and the Garvin Guy Butler Corporation. He was an editor of the Journal of Finance and was a past President of the American Finance Association. Professor Ritter was also the author of numerous articles in professional journals and of The Glory of Their Times, a best-selling book about the early days of baseball.

William L. Silber is the Marcus Nadler Professor of Finance and Economics and Director, Glucksman Institute for Research in Securities Markets at the Stern School of Business of New York University. A former Senior Staff Economist with the President’s Council of Economic Advisers and a former Senior Vice President at Lehman Brothers Kuhn Loeb, he has served as a consultant to the Board of Governors of the Federal Reserve System, the President’s Commission on Financial Structure and Regulation, the U.S. Senate Committee on the Budget, the House Committee on Banking and Financial Services, the Justice Department, the Federal Home Loan bank Board, the National Commission on Electronic Fund Transfers, and the Department of Housing and Urban Development. He is on the Economic Advisory Panel of the Federal Reserve Bank of New York and is the author of five books and numerous articles in professional journals.

Gregory F. Udell is the Bank One Chair of Banking and Finance at the Kelley School of Business of Indiana University. He was formerly a banker and commercial loan officer in Chicago specializing in lending to small and midsized Midwestern companies. Currently, his academic research focuses on banking and financial contracting. He has published numerous articles in academic journals including the Journal of Political Economy, the Journal of Financial Economics, the Journal of Monetary Economics, and the Journal of Business. He is an associate editor of six journals, including the Journal of Money, Credit, and Banking, the Journal of Banking and Finance, and the Journal of Financial Services Research. Professor Udell has been a visiting economist and consultant to the Board of Governors of the Federal Reserve System.

Table of Contents

The Basics

Introducing Money, Banking, and Financial Markets

An Overview

Why Study Money, Banking, and Financial Markets?

Careers in Banking and Financial Markets

The Role of Money in the Macroeconomy

Introducing Money

Money, the Economy, and Inflation

Financial Instruments, Markets, and Institutions

Flow of Funds

Financial Instruments and Markets

Financial Intermediaries: Purposes and Profile

Financial Instruments and Markets

Interest Rate Measurement and Behavior

Calculating Interest Rates

What Determines the Level of Interest Rates?

The Term and Risk Structure of Interest Rates

The Term Structure of Rates and the Yield Curve

Risk and Tax Structure of Rates

Appendix: Bond Price Volatility: Duration Versus Maturity

The Structure and Performance of Securities Markets

Nature and Function of Securities Markets

Efficiency of Secondary Market Trading

Efficient Capital Markets and Regulation

The Pricing of Risky Financial Assets

Economic Uncertainty

Principles of Diversification

The Risk Premium on Risky Securities

Money and Capital Markets

The Government Bond Market

Bank-Related Securities: CDs and Eurodollars

Corporate Securities

Municipal Securities

Mortgage Securities

The Stock Market

Demystifying Derivatives

An Overview of Financial Futures

An Overview of Options Contracts

An Overview of Swaps

Understanding Foreign Exchange

What Determines Foreign Exchange Rates?

Fixed Versus Floating Exchange Rates

Banks and Other Intermediaries

The Nature of Financial Intermediation

The Economics of Financial Intermediation

The Evolution of Financial Intermediaries in the United States

Financial Intermediaries: Assets, Liabilities, and Management

Depository Financial Institutions

The Fundamentals of Bank Management

Major Trends in Bank Management

Nonbank Depository Institutions The Thrifts

Nondepository Financial Institutions

Insurance Companies and Pension Funds

Mutual Funds

Finance Companies

Securities Brokers and Dealers and Investment Banks

Venture Capital Funds, Mezzanine Debt Funds, and Hedge Funds

Banks Versus Nondepository Institutions

Financial System Architecture

Understanding Financial Contracts

How Business Obtains Financing

The Economics of Financial Contracting

The Regulation of Markets and Institutions

The Regulation of Financial Markets in the United States

The Regulation of Commercial Banks in the United States

Regulation of Nondepository Financial Intermediaries

Where Securities Market and Banking Regulation Meet: The Glass-Steagall Act, A Collapsing Barrier

Financial System Design

Information and Financial System Design

Financial System Design: A Descriptive Summary of Germany, Japan, the United Kingdom, and the United States

Financial System Design and Conflict Resolution: Germany, Japan, the United Kingdom, and the United States

Financial System Design for Eastern Europe and Other Emerging Economies

The Art of Central Banking

Who's in Charge Here?

Formal Structure of the Federal Reserve System

The Realities of Power

The Problem of Federal Reserve Independence

Bank Reserves and the Money Supply

Check Clearing and Collection

Deposit Expansion: The Single Bank

Deposit Expansion: The Banking System

Deposit Contraction

Appendix: The Complete Money Supply Process

The Instruments of Central Banking

Reserve Requirements

Discounting and the Discount Rate

Open Market Operations

Understanding Movements in Bank Reserves

The Fed's Balance Sheet

The U.S. Treasury's Monetary Accounts

The Bank Reserve Equation

Putting It All to Use

Appendix: Monetary Effects of Treasury Financing

Monetary Policy Strategy

The FOMC Directive

The Fed's Strategy

The Taylor Rule and the Fed's Track Record

Monetary Theory

The Classical Foundations

Classical Economics

Aggregate Demand and Supply: A Summary

Real Versus Nominal Rates of Interest

Modern Modifications: Monetarists and New Classicists

Appendix: GDP Definitions and Relationships

The Keynesian Framework

When Saving Doesn't Equal Investment

Consumption and Simple GDP Determination

Government to the Rescue

Money and the Rate of Interest

Monetary Policy

Aggregate Demand and Supply

The ISLM World

The LM Curve

The IS Curve

The Simultaneous Determination of Income and Interest: IS and LM Together

Monetary and Fiscal Policy

ISLM and Aggregate Demand

Appendix: The Simple Algebra of Income Determination

Money and Economic Stability in the ISLM World

Monetary Policy, Fiscal Policy, and Crowing Out

Is the Private Sector Inherently Stable?

Flexible Prices, the Natural Rate of Interest, and Real Crowding Out

Appendix: Interest Rates Versus the Money Supply Under Uncertainty

An Aggregate Supply and Demand Perspective on Money and Economic Stability

Is the Private Sector Inherently Stable?

Monetary Policy, Fiscal Policy, and Crowding Out

Inflation, Money, and the Phillips Curve

Inflation and Interest Rates

Should a Robot Replace the Federal Reserve?

Rational Expectations: Theory and Policy Implications

When Are Expectations Rational?

Anticipated Versus Unanticipated Monetary Policy

Implications for Stabilization Policy

Inflation, the Phillips Curve, and Credibility

Interest Rates and Anticipated Monetary Policy

Empirical Evidence on the Effectiveness of Monetary Policy

Living with Velocity

The Impact of Monetary Policy on GDP

Grand Finale

Tying It All Together

The Economic Indicators

Valuation, the Fed, and Market Reaction

Putting It All Together

Glossary

Index

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