EC320: Money and Banking

Module code: EC320

Module provider: Economics; School of Philosophy, Politics and Economics

Credits: 20

Level: Level 3 (Honours)

When you'll be taught: Semester 2

Module convenor: Dr Christos Mavrodimitrakis, email: c.mavrodimitrakis@reading.ac.uk

Pre-requisite module(s):

Co-requisite module(s):

Pre-requisite or Co-requisite module(s): BEFORE OR WHILE TAKING THIS MODULE YOU MUST TAKE EC201 AND TAKE EC202 (Compulsory)

Module(s) excluded:

Placement information: NA

Academic year: 2024/5

Available to visiting students: Yes

Talis reading list: Yes

Last updated: 23 May 2024

Overview

Module aims and purpose

This module builds on Intermediate Macroeconomics to study the economics of money, banking, and financial markets. The module consists of two basic parts: Financial Markets and Institutions; and Central Banking and Monetary Policy; while the role of money is at the centre of the analysis. Both the Great Recession and the Covid-19 pandemic highlight the volatility of financial markets and demonstrate the importance of central banks to the health of the financial system and the economy. This volatility can hit financial consumers directly, leading to difficulty in getting loans, falling home values, declining retirement account values and jeopardising jobs. We discuss interest rates, their relation to bond prices and returns, and their determination. We extend the analysis of the bond market to explain changes in credit spreads and the term structure. We also look at the role of expectations in the stock market and explore what drives stock prices. Financial institutions are central in the workings of the economy. We will look at financial structure and at the business and process of banking. On central banking, we explore what central banks are trying to achieve; what motivates them; how the money supply is determined; what are the policy tools central banks have in their disposal; how monetary policy is being conducted. We further discuss how the quantity theory of money explains inflation in the long run and how theories of the demand for money have evolved; the role of expectations in monetary policy; and the transmission mechanisms through which monetary policy affects the aggregate economy.

Module learning outcomes

By the end of the module, it is expected that students will be able to:

1. Demonstrate an understanding of the role of money in modern financial systems;
2. Understand how the interest rates are determined, what are the factors affecting their behaviour and what is their risk and term structure;
3. Understand the role of financial institutions and how banks are different from other financial intermediaries;
4. Understand the role and functions of central banks and the way they formulate monetary policy;
5. Demonstrate an understanding of the various channels of monetary policy.

Module content

Basic topics may include: money; the meaning, behaviour, risk and term structure of interest rates; basics of financial system, bonds, stocks; financial institutions and bank (liquidity) management; central banks; the money supply process; tools and conduct of monetary policy; theories of money demand; transmission channel of monetary policy. Additional content covered may include: the stock market; the role of expectations in monetary policy.

Structure

Teaching and learning methods

Detailed guidance on the topics covered will be provided in the weekly lectures, together with occasional handouts covering the material discussed, examples, exercises and solutions to facilitate understanding of key concepts. Readings from academic journals and/or policymaking institutions will be assigned for each lecture, if needed.

Study hours

At least 20 hours of scheduled teaching and learning activities will be delivered in person, with the remaining hours for scheduled and self-scheduled teaching and learning activities delivered either in person or online. You will receive further details about how these hours will be delivered before the start of the module.

Please note the independent study hours above are notional numbers of hours; each student will approach studying in different ways. We would advise you to reflect on your learning and the number of hours you are allocating to these tasks.

Semester 1 The hours in this column may include hours during the Christmas holiday period.

Semester 2 The hours in this column may include hours during the Easter holiday period.

Summer The hours in this column will take place during the summer holidays and may be at the start and/or end of the module.

Assessment

Requirements for a pass

Students need to achieve an overall module mark of 40% to pass this module.

Summative assessment

Penalties for late submission of summative assessment

The Support Centres will apply the following penalties for work submitted late:

Assessments with numerical marks

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of three working days;
• the mark awarded due to the imposition of the penalty shall not fall below the threshold pass mark, namely 40% in the case of modules at Levels 4-6 (i.e. undergraduate modules for Parts 1-3) and 50% in the case of Level 7 modules offered as part of an Integrated Masters or taught postgraduate degree programme;
• where the piece of work is awarded a mark below the threshold pass mark prior to any penalty being imposed, and is submitted up to three working days after the original deadline (or any formally agreed extension to the deadline), no penalty shall be imposed;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

Assessments marked Pass/Fail

• where the piece of work is submitted within three working days of the deadline (or any formally agreed extension of the deadline): no penalty will be applied;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension of the deadline): a grade of Fail will be awarded.

The University policy statement on penalties for late submission can be found at: https://www.reading.ac.uk/cqsd/-/media/project/functions/cqsd/documents/qap/penaltiesforlatesubmission.pdf

You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Formative assessment

Formative assessment is any task or activity which creates feedback (or feedforward) for you about your learning, but which does not contribute towards your overall module mark.

Reassessment

Additional costs