Module Title: Money and
the Financial System
Programme: BA
Economics / BA (Hon) Economics
Module Code: ECF 201
Credit Value: 12
Module Tutor: Sonam Cheki
General Objectives
This course exposes students to the
theory and functioning of the monetary and financial sectors of the economy. It
highlights the organization, structure and role of financial markets and
institutions. It also discusses interest rates, monetary management and
instruments of monetary control. Financial and banking sector reforms and
monetary policy with special reference to Bhutan are also covered.
Learning Outcomes
At the end of this module, the
students are expected to be able to:
·
Present
opinions and ideas on basic theoretical issues related to finance and banking
·
Critically
evaluate the current policy debate in the areas of monetary and financial
system
·
Analyze the impact of central bank monetary policy on financial systems and the overall economy.
·
Appraise the roles of financial intermediaries as both brokers and asset transformers.
·
Evaluate the different financial intermediation and risk management services that
financial institutions provide and the need for governmental regulation.
·
Assess the development of financial markets and securities in response to market
participant requirements.
Learning and teaching approach:
Lectures (60 hours in 15 weeks)
Tutorials (15 hours in 15 weeks)
Discussions (10 hours in 15 weeks)
Assignments (20 hours in 15 weeks)
Assessment:
Semester end examination (60%)
Assessments (2 x 15%)
Assignment (5%)
Presentation (5%)
Subject Matter
1. Money (10
hours)
Concept, functions, measurement,
theories of money supply determination.
2. Financial Institutions,
Markets, Instruments and Financial Innovations
Role of financial markets and
institutions; problem of asymmetric information (adverse selection and moral
hazard); financial crises; Money and capital markets: organization, structure
and reforms in Bhutan; role of financial derivatives and other innovations. (15
hours)
3. Interest Rates (10
hours)
Determination; sources of interest
rate differentials; theories of term structure of interest rates; structures of
interest rates in Bhutan (deposit & bank rate), RMA (CRR & SLR).
4. Banking System (10
hours)
Balance sheet and portfolio
management; Bhutanese banking system: Changing role and structure; banking
sector reforms.
5. Royal Monetary
Authority of Bhutan and it’s Monetary Policy (15 hours)
Roles and Functions, balance sheet,
goals, targets, indicators and instruments of monetary control; monetary
management in an open economy; current monetary policy of RMA (Royal Monetary
Authority of Bhutan).
Reading list
Essential Reading:
- Mishkin, F. (2012). Economics
of Money, Banking and Financial Markets, 10th edition, Prentice Hall.
- Lehn, B., Julia, S. R., & Zielenbach,
S. (2004). Community development financial institutions: Current issues
and future prospects. Journal of Urban Affairs, 26(2), 177-195.
- Piazzesi, M., & Schneider,
M. (2010). Interest rate risk in credit markets. The American Economic
Review, 100(2), 579-584.
4. Mishkin, F. S., & Eakins, S. G. (2009). Financial
Markets and Institutions. (6th edition). Pearson Education.
- Bhole, L., M. & Mahukud, J.
(2011). Financial Institutions and Markets. (5th
edition). Tata McGraw Hill.
Suggested reading:
- Baye, M. R., & Jansen, D.
W. (1996). Money, Banking and Financial Markets. AITBS.
- Ghatak, S. (1995). Monetary
Economics in the Developing Countries. (2ndedn.). McMillan
- Mohan, R. (2011). Growth
with financial stability: Central banking in an emerging market. New
Delhi: Oxford University Press.
4. Annual Report of RMA
(latest version)
5. http://global.oup.com/uk/orc/busecon/economics/gillespiebusiness/01student/cases/
6. http://www.rma.org.bt/
(Updated June, 2013)