ECS 3701
STUDY NOTES
2022 (All Units)
2
ECS 3701
Lecture Notes
Nicolas Souvaris
Table of Contents
Part 1- Introduction
Chapter 1: Why study
... [Show More] money, banking and financial markets?
Chapter 2: An overview of the financial system
Chapter 3: What is money?
Part 2 - Financial Markets
Chapter 4: Understanding interest rates
Chapter 5: The behaviour of interest rates
Chapter 6: The risk and term structure of interest rates
Part 3 - Financial institutions
Chapter 8: An economic analysis of financial structure
Chapter 9: Financial crises in advanced economies
Chapter 10: Financial crises in emerging market economies
Chapter 11: Banking and the management of financial
institutions
Part 4 - Central banking and the conduct of monetary policy
Chapter 14: Central banks: a global perspective
Chapter 15: The money supply process
Chapter 16: Tools of monetary policy
Chapter 17: The conduct of monetary policy
Part 5 - Not Prescribed
Part 6 - Monetary theory
Chapter 20: Quantitative theory, Inflation and the demand for
money
Chapter 21: The IS curve
Chapter 24: Monetary policy theory
Chapter 25: The role of expectations in monetary policy
Chapter 26: Transmission mechanisms of monetary policy
3
ECS 3701
Lecture Notes
Nicolas Souvaris
Part one: Introduction
(Textbook: Chapters 1, 2 and 3)
CHAPTER 1: WHY STUDY MONEY, BANKING AND FINANCIAL MARKETS
Why study financial markets?
Securities - a claim on the issuer’s future income or assets that is sold by a
borrower to a lender. Securities may also be referred to as financial
instruments. Financial instruments may be divided into two main categories:
money market instruments (e.g. Negotiable Certificate of Deposit (NCDs),
Commercial Papers; Retirement Annuity (RAs) and Bankers Acceptance
(Bas)) and capital market instruments (e.g. bonds and shares).
Bonds - a specific type of security, namely a debt security that promises to
make payments periodically for a specified period of time.
Interest rate - cost of borrowing or the price paid for the rental of funds. “The”
interest rate is made up of a number of different interest rates that exist in an
economy. E.g. mortgage, car loan etc
Bond Market is especially important to economic activity because it enables
corporations and governments to borrow to finance their activities and it is
where interest rates are determined.
Stock Market is the market in which claims on the earnings of corporations
(shares of stocks) are traded. In SA we refer to the trading of shares rather
than stocks.
Stock (share) - equity: a financial instruments representing part ownership of a
corporate entity. Sometimes referred to as common stock as compared to
the more specialized type of share, e.g. preference shares. Issuing shares is a
way in which a company can raise funds.
Importance of stock /stock market: the price (value) [Show Less]