Chap 1

CENTRAL BANK
and MONETARY POLICIES

International School
Introduce
+84365388130 pls text again

nguyenminhanh Nguyen Thi Minh Anh
@tnu.edu.vn
FB: Minh Anh
CENTRAL BANK
and MONETARY POLICIES
3 credits = 45 hours
8 chapters
Objects
Understand the role and Understand the Apply the knowledge

function of money in the economic issues behind learned in practice to
economy, especially in the conduct of well perform the work
the determination of monetary policy and social
inflation and output responsibility of
businesses and
Understand the different Understand the formulation individuals .
views and schools of of expectations and the
thought in monetary important role of
economies expectation in economic
decisions and policies
Contents
• Chapter 1: An Introduction to Money and the
Financial System
• Chapter 2: Money and the Payments System
• Chapter 3: Financial Instruments, Financial Markets,
and Financial Institutions
• Chapter 4: Central Banks in the World Today
• Chapter 5: The Structure of Central Banks: The
Federal Reserve and the European Central Bank
• Chapter 6: The Central Bank Balance Sheet and the
Money Supply Process
• Chapter 7: Monetary Policy: Stabilizing the Domestic
Economy
• Chapter 8: Exchange-Rate Policy and the Central
Bank
Requirement
• Joint class every hour • Do homeworks
• Take notes • Read before class
Assessment method
Criteria Note
- Full attendance, contribution during class
Attendance
- Quizzes / Assignments
Mid-term Test Test
Final Test Multiple choices, Essay
Chapter 1
An Introduction to Money
and the Financial System
Contents
Six parts of the financial system.
Five core principles of money and banking

Getting started
This morning, a typical American college student bought

coffee at the local café, paying for it with an ATM card. Then
she jumped into her insured car and drove to the university,
which she attends thanks to her student loan. She may have
left her parents’ home, which is mortgaged, a few minutes
early to avoid construction work on a new dormitory, financed
by bonds issued by the university. Or perhaps she needed to
purchase this book online, using her credit card, before her
first money and banking class began.
Crisis 2008-2009
The Six Parts of the Financial System
Money Financial markets Government
• Payment • Buy and sell regulatory
financial agencies
• Store of wealth
instruments • responsible for
safe and reliable
Financial Financial Central banks
instruments institutions • Monitor and
• Stocks, bonds • Banks stabilize the
• Mortgages • Securities firms economy
• Insurance policies • Insurance
companies
MONEY
• gold and silver coins (commodity money)

• paper currency (fiat money)
• electronic transfers
• means of payment: currency  withdraw from ATM  bank’s
website/smartphone
FINANCIAL INSTRUMENTS
• Securities: stocks and bonds small

number
• Collecting the information
necessary to evaluate time
a potential consuming
Costly
Investment Mutual
was a daunting task funds
FINANCIAL MARKETS
• stocks and bonds are sold

• reduced the cost of processing financial transactions
• individuals exchange  specifically trading places  handled by
electronic networks
• offer a much broader array of financial instruments than before
FINANCIAL INSTITUTIONS
• Bank = vaults where people could store their valuables

• Accept deposits and make loans
• FINANCIAL SUPERMARKET: financial markets, insurance policies,
mortgages, consumer credit, and even investment advice
GOVERNMENT REGULATORY AGENCIES
• wide-ranging financial regulation: rules for the operation and

supervision
• the evolution of financial instruments, institutions, and markets
has led to many changes in the ways that regulatory agencies work
CENTRAL BANKS
large private
banks government modern central
(to finance treasuries banks
wars)
• control the availability of money and credit  stability

The Five Core Principles of Money and Banking
Stability
Time Markets
Informa-
tion
Risk
Core Principle 1: Time Has Value
• Salary be paid by the hour = time has a price

• An auto loan: $10,000 in 4 years at the rate of 4%
~ you are paying interest to compensate
the lender for the time during which
you use the funds
• Bonds/stocks/other financial instruments ~ future payments
Core Principle 2: Risk Requires Compensation
• The world is filled with uncertainty.

• Dealing effectively with risk: eliminate some risks, reduce others,
pay someone to assume some risks  COMPENSATION
• In the financial world, compensation is made in the form of explicit
payments.
Core Principle 2: Risk Requires Compensation
• Ex1: Insurance
 both the insurance company and the drivers who buy policies are
ultimately better off
• Ex2: Bonds
 a company or a government that is on the verge of being unable to
pay its bills may still be able to issue bonds (called junk bonds), but
it will have to pay an extremely high interest rate to do so
Core Principle 3: Information Is the Basis for Decisions
• The more important the decision, the more information we gather

 the collection and processing of information is the foundation of
the financial system

• When lenders fail to assess creditworthiness properly, they end up

with more borrowers who are unable to repay their loans in the
future.
Core Principle 4: Markets Determine Prices

and Allocate Resources
where buyers and sellers meet
Markets
where firms go to issue where individuals go to trade

stocks and bonds assets
Core Principle 4: Markets Determine Prices

and Allocate Resources
• Well-developed financial markets are a necessary

precondition for healthy economic growth
Financial Economic 1. markets determine prices and allocate
Markets Growth
resources
2. markets are sources of information
 a basis for the allocation of capital
Core Principle 5: Stability Improves Welfare
• Stability is a desirable quality, not just in our personal lives but in

the financial system as a whole.
• Core Principle 2 (risk requires compensation)
• volatility creates risk  reducing volatility reduces risk
• Monetary policymakers can moderate downswings by carefully
adjusting interest rates

Chap 1

Uploaded by

Copyright:

Available Formats

Chap 1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chap 1

Uploaded by

Copyright:

Available Formats

CENTRAL BANK

and MONETARY POLICIES

+84365388130 pls text again

Understand the role and Understand the Apply the knowledge

Five core principles of money and banking

This morning, a typical American college student bought

• gold and silver coins (commodity money)

• Securities: stocks and bonds small

• stocks and bonds are sold

• Bank = vaults where people could store their valuables

GOVERNMENT REGULATORY AGENCIES

• wide-ranging financial regulation: rules for the operation and

• control the availability of money and credit  stability

Core Principle 1: Time Has Value

• Salary be paid by the hour = time has a price

Core Principle 2: Risk Requires Compensation

• The world is filled with uncertainty.

Core Principle 2: Risk Requires Compensation

Core Principle 3: Information Is the Basis for Decisions

• The more important the decision, the more information we gather

Core Principle 3: Information Is the Basis for Decisions

Core Principle 3: Information Is the Basis for Decisions

• When lenders fail to assess creditworthiness properly, they end up

Core Principle 4: Markets Determine Prices

where firms go to issue where individuals go to trade

Core Principle 4: Markets Determine Prices

• Well-developed financial markets are a necessary

Core Principle 5: Stability Improves Welfare

• Stability is a desirable quality, not just in our personal lives but in

You might also like