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Money and Finance

Home/ Money and Finance
Course TypeCourse CodeNo. Of Credits
Discipline CoreSUS1EC1344

Semester and Year Offered:Semester VI (Winter Semester 2019)

Course Coordinator and Team: Aishwarya Jain

Email of course coordinator:aishwaryajaincc@gmail.com

Pre-requisites:

Basic understanding of macroeconomics and Indian economy is desirable, not mandatory.

Course Objective:

The course is designed to equip students with the importance and functioning of money flow, finance and financial markets. This is done at three levels. Firstly, by building an understanding of key concepts like Money supply, credit, financial institutions, financial innovation and repression, interest rate theories and the banking system. Secondly, in the context of International economy’s aspects of money and finance. Thridly, in the context of current Indian economic issues pertaining to banking and finance.

Course Outcomes:

On successful completion of this course students will be able to:

  1. Analyse and deconstruct financial sector’s working in terms of multiplier mechanism (theory + practical), imperfect information, Interest rate differentials and term structure, bond market, Banking sector.
  2. Describe international monetary system and key developments like financial crises in 20th and 21st Century, financial liberalisation.
  3. Interpret recent developments in the Indian economy’s financial sector in terms of their background and underlying reasons.

 

Brief description of modules/ Main modules:

  • Part I: Key Concepts-
  1. Money– Concept, Functions, measurement, Money Supply, Credit Creation- Deposit and Money Multiplier
  2. Financial Institutions, Markets and Instruments — Role of Financial Markets and Institutions; problems of asymmetric information – adverse selection and moral hazard, financial crisis
  3. Financial Innovation and Repression
  4. Interest Rates— Determination, Sources of interest rates differentials, Theories of term structure of interest rates
  5. Banking system— Changing Role and Structure of Banking Sector
  6. Central Banking— Functions and Monetary policy tools

 

Readings:

1. Frederic S. Mishkin, The Economics of Money, Banking, and Financial Markets, 11th Edition

  • Chapters 3 – What is Money?
  • Chapter 15 – The Money Supply Process
  • Chapter 11 – Banking Industry: Structure and Competition.
  • Chapter 16 – Tools of Monetary Policy, only the section on “Conventional Monetary Policy Tools” Pages 418-425.

2. The Annual Report on the Working of the RBI, Part two: The Working and operations of the Reserve Bank of India.
Only sections – III.1 to III.7.
(https://rbidocs.rbi.org.in/rdocs/AnnualReport/PDFs/1IIIMONETARY8FF02E779DF54DF5ACC02CBD06B4FB04.PDF)

3. Mishkin and Eakins, Financial Markets and Institutions, 7th Edition

  • Chapters 2 – Overview of the Financial System
  • Chapter 8 – Why Do Financial Crises Occur and Why Are They So Damaging to the Economy?
  • Chapter 4 – Why Do Interest Rates Change?
  • Chapter 5 – How Do Risk and Term Structure Affect Interest Rates?

 

Part II: International aspects of money and finance-

  1. International monetary system
  2. Financial Liberalisation
  3. Financial crisis (Including discussions on East Asian Financial Crisis, 1997; Global Financial Crisis of 2008)

 

Readings:

  1. Krugman and Obstfeld, International Economics- Theory & Policy, Ninth Edition – Chapter 19- International Monetary Systems: An Historic Overview
  2. *Barry Eichengreen, Globalising Capital- A History of the international monetary system (*Optional)
  3. The Economic and Social Effects of Financial Liberalisation: A Primer for Developing Countries (https://www.un.org/esa/desa/papers/2005/wp4_2005.pdf)
  4. Financial Crisis, CP Chandrasekhar in New Oxford Companion to Economics in India, ed. Basu & Maertens

 

Part III: India’s Financial Sector

Structure of India's financial system and impact on economic growth

Financial Sector Reforms

Development Finance Institutions

Indian banking system and banking sector reforms

Changing role of RBI

Current monetary policy and linkages with real economy

Current issues in financial markets and Banking, such as NPAs, NBFCs crisis

Readings:

  1. Indian Financial Sector: Structure, Trends and Turns by Rakesh Mohan and Partha Ray (http://www.rakeshmohan.com/docs/WP1.pdf)
  2. CP Chandrasekhar, Development Finance in India (https://in.boell.org/sites/default/files/uploads/2014/03/development_finance_in_india.pdf)
  3. Foreign Direct and Portfolio Investments Flows and Development, Nagesh Kumar in Indian Economy since Independence, ed. Uma Kapila
  4. Changing Role of RBI, YV Reddy (https://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/13778.pdf)
  5. Reflections on Analytical Issues in Monetary Policy: The Indian Economic Realities by A. Vasudevan, EPW.

 

Assessment Methodology:

  • Assessment 1:In-class exam with weightage =30%
  • Assessment 2: Term Paper (20% weightage) plus presentation (10% weightage)
  • Assessment 3:In-class exam withweightage =40%

 

Reading List:

  1. Frederic S. Mishkin, The Economics of Money, Banking, and Financial Markets, 11th Edition
  2. Mishkin and Eakins, Financial Markets and Institutions, 7th Edition
  3. Krugman and Obstfeld, International Economics- Theory & Policy, Ninth Edition
  4. The Annual Report on the Working of the RBI, Part two: The Working and operations of the Reserve Bank of India
  5. *Barry Eichengreen, Globalising Capital- A History of the international monetary system (*Optional)
  6. The Economic and Social Effects of Financial Liberalisation: A Primer for Developing Countries (https://www.un.org/esa/desa/papers/2005/wp4_2005.pdf)
  7. Financial Crisis, CP Chandrasekhar in New Oxford Companion to Economics in India, ed. Basu & Maertens
  8. Indian Financial Sector: Structure, Trends and Turns by Rakesh Mohan and Partha Ray (http://www.rakeshmohan.com/docs/WP1.pdf)
  9. CP Chandrasekhar, Development Finance in India (https://in.boell.org/sites/default/files/uploads/2014/03/development_finance_in_india.pdf)
  10. Foreign Direct and Portfolio Investments Flows and Development, Nagesh Kumar in Indian Economy since Independence, ed. Uma Kapila
  11. Changing Role of RBI, YV Reddy (https://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/13778.pdf)
  12. Reflections on Analytical Issues in Monetary Policy: The Indian Economic Realities by A. Vasudevan, EPW.