Money and credit perform a range of crucial functions in market economies. This module studies the microeconomic foundations of money and credit, and the roles played by money and credit markets in contributing to macroeconomic growth, fluctuations and crises. Throughout the module, we also consider the roles of government institutions including central banks and financial regulators within modern markets for money and credit. The module makes use of theoretical models to aide understanding and analyse policy. These models are motivated by and tested against historical and contemporary evidence, with students performing a selection of these tests using modern financial programming tools. While the core features of money and credit have remained stable for centuries, innovation in these markets does play important roles for economic growth and business cycles. At the end of the course, we study some of the more important developments in modern money and credit markets, including securitisation as well as the range of innovations collectively referred to as digital money.
Total contact hours: 30
Private study hours: 120
Total study hours: 150
20% Take-home exam
80% Examination (2 hours)
• Freixas, Xavier and Jean Rochet. The Microeconomics of Banking, 2nd Edition, vol. 1, 2 ed. MIT Press, 2008
• Sargent, Thomas and Francois Velde. The big problem of small change. Princeton University Press, 2003
• Wallace, Neil. The Mechanism-Design Approach to Monetary Theory. In: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, 1st Edition, Volume 3, Chapter 1. North Holland, 2010
See the library reading list for this module (Canterbury)
On successfully completing the module students will be able to:
• systematically and comprehensively understand the roles of debt finance in the modern economy
• critically understand and assess the roles of money in the modern economy
• explain complex interactions between firms and banks' financial structures in macroeconomic crises
• critically understand the implementation of monetary policy
• demonstrate deep understanding of the importance of conflicts of interest in finance
• proficiently apply advanced economic models to analyse complex and controversial issues in finance
• skilfully utilize modern computing resources to access and acquire financial data from all available sources
• build informed opinion on advanced topics with high level of abstraction and develop convincing argumentation
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