1. The Economics of Money, Banking and Financial Markets
Frederic S. Mishkin

2. Contents PART 1 Introduction PART 2 Financial Markets
PART 3 Financial Institutions
PART 4 Central Banking and the Conduct of Monetary Policy
PART 5 International Finance and Monetary Policy
PART 6 Monetary Theory

3. Works 1、Financial Markets and Institutions
2、Inflation Targeting: Lessons from the International Experience
3、Money, Interest Rates, and Inflation
4、A Rational Expectations Approach to Macroeconometrics: Testing Policy Ineffectiveness and Efficient Markets Models

4. Why Study Money, Banking, and Financial Markets?
chapter 1
Why Study Money, Banking, and Financial Markets?

5. Why Study Financial Markets?
1. Channel funds from savers to investors, thereby promoting economic efficiency
2. Affect personal wealth and behavior of business firms
Why Study Banking and Financial Institutions?
1. Financial Intermediation
Helps get funds from savers to investors
2. Banks and Money Supply
Crucial role in creation of money
3. Financial Innovation
Why Study Money and Monetary Policy?
1. Influence on business cycles, inflation, and interest rates

6. Bond Market
A security is a claim on the issuer’s future income or assets. P3
A bond is a debt security that promises to make payments periodically for a specified period of time.
Interest rate is the cost of borrowing or the price paid for the rental of funds. P4

7. Stock Market
A common stock represents a share of ownership in a corporation.

8. Stock Market

9. Foreign Exchange Market
It affect pubic and businesses.
Affect the cost of foreign goods and vacationing abroad.
Foreign exchange rate P5

10. Money and Business Cycles

11. Money and the Price Level
“Inflation is always and everywhere a monetary phenomenon “(Milton Friedman)

12. Money Growth and Inflation

13. Money Growth and Interest Rates

14. Budget Deficits and Monetary Policy

15. Appendix: Definitions
Aggregate Output
Gross Domestic Product (GDP) = Value of all final goods and services produced in domestic economy during year
Aggregate Income
Total income of factors of production (land, capital, labor) during year
Distinction Between Nominal and Real
Nominal = values measured using current prices
Real = quantities, measured with constant prices
Aggregate Price Level
nominal GDP
GDP Deflator =
real GDP
$9 trillion
GDP Deflator = = 1.50
$6 trillion
Consumer Price Index (CPI) price of “basket” of goods and services

16. Financial markets, markets in which funds are transferred from people who have an excess of available funds to people who have a shortage.
3 types
Bond market;
Stock market;
Foreign exchange market;