Money and Banking

This course provides an overview of the economic principles that underlie the operation of banks and other financial institutions. The impact of monetary policy in Australia will also be examined with particular emphasis on the roles played by the Reserve Bank and other banking and financial institutions. Topics may include how economic theory applies to financial markets; the process of financial intermediation; available financial statistics; the money supply process and the implementation of monetary policy; money in the macroeconomy; the recent behaviour of major financial aggregates; the 1997/98 Asian economic crisis; financial regulation and deregulation; the monetary transmission mechanism; and a discussion of the recent approach to monetary policy in Australia. The course emphasises institutional and public policy issues, providing an Australian perspective on this topical subject.

• 1Explain how financial institutions improve welfare outcomes by facilitating borrowing and lending outcomes that would not otherwise occur
• 2Synthesise how financial institutions transform the risk and liquidity structure of financial assets and remove informational asymmetries and identify the subsequent impact on borrowing and lending opportunities
• 3Describe the role of the financial intermediary and the function of financial institutions in facilitating financial intermediation
• 4Analyse the implication of expectations in economic markets generally and in financial markets particularly;
• 5Explain regulation and deregulation of economic markets in general and of financial markets in particular
• 6Evaluate the implementation of, and recent approach to, monetary policy in Australia and explain the transmission of monetary policy throughout the economy
• 7Describe the role of money and financial institutions in recent problems in the world economy
• 8Apply relevant theories to the real world issues and scenarios, such as how the institutional structure of the Reserve Bank Board can be designed to minimise the incentive to deliver undesirable outcomes
• 9Critically evaluate the relevance of competing theories. For example, the extent to which different types of market failure apply to financial markets and consequently how best to regulate financial markets.