| 作者 |
| ［美］弗雷德里克·S. 米什金（Frederic S. Mishkin） |
| 丛书名 |
| 高等学校经济管理英文版教材 |
| 出版社 |
| 机械工业出版社 |
| ISBN |
| 9787111692447 |
| 简要 |
| 简介 |
| 内容简介书籍经济管理学书籍 本书是美国众多知名商学院广受推崇的教科书，同时也是货币金融学领域的一本经典著作，自引入中国以来，一直畅销不衰。本版较上一版做了较大的改动，增加了很多新的内容、案例和专栏。本书共6篇、25章，通过建立一个统一的分析框架，用基本经济学理论帮助读者理解金融市场、金融机构管理、中央银行和货币政策以及国际金融等问题。本书适合金融专业以及相关经济专业的本科生和研究生作为教材使用，也适合作为专业人士的参考用书。 |
| 目录 |
| 作者简介 前言 术语表 第一篇 导论 第1章 为什么要研究货币、银行和金融市场 2 1.1 研究金融市场的原因 2 1.2 研究银行和其他金融机构的原因 5 1.3 研究货币和货币政策的原因 7 1.4 研究国际金融问题的原因 11 1.5 货币、银行和金融市场与你的职业发展 14 1.6 研究货币、银行和金融市场的方法 14 1.7 结语 15 本章小结 15 关键术语/思考题 16 应用题/数据分析题 17 网络练习/网络参考 18 附录1A 对于总产出、总收入、物价水平和通货膨胀率的定义 19 第2章 金融体系概览 22 2.1 金融市场的功能 22 2.2 金融市场的结构 25 2.3 金融市场工具 27 2.4 金融市场的国际化 31 2.5 金融中介机构的功能：间接融资 33 2.6 金融中介机构的类型 38 2.7 金融体系的监管 42 本章小结 45 关键术语/思考题 46 应用题 47 数据分析题/网络练习/网络参考 48 第3章 什么是货币 49 3.1 货币的含义 49 3.2 货币的职能 50 3.3 支付体系的演变 53 3.4 货币的计量 56 本章小结 59 关键术语/思考题 60 应用题 61 数据分析题/网络练习/网络参考 62 第二篇 金融市场 第4章 理解利率 64 4.1 利率的计量 64 4.2 利率和回报率的区别 75 4.3 实际利率和名义利率的区别 80 本章小结/关键术语/思考题 83 应用题 84 数据分析题/网络练习/网络参考 85 第5章 利率行为 86 5.1 资产需求的决定因素 86 5.2 债券市场的供给和需求 89 5.3 均衡利率的变动情况 92 5.4 货币市场的供给和需求：流动性偏好理论 102 5.5 流动性偏好理论中的均衡利率变动 105 5.6 货币和利率 108 本章小结/关键术语/思考题 113 应用题 114 数据分析题 115 网络练习/网络参考 116 第6章 利率的风险与期限结构 117 6.1 利率的风险结构 117 6.2 利率的期限结构 125 本章小结/关键术语/思考题 137 应用题/数据分析题 139 网络练习/网络参考 140 第7章 股票市场、理性预期理论和有效市场假说 141 7.1 普通股股票价格的计算 141 7.2 股票市场的定价机制 144 7.3 理性预期理论 146 7.4 有效市场假说：金融市场中的理性预期理论 150 7.5 为什么有效市场假说并不意味着金融市场是有效的 156 7.6 行为金融 157 本章小结 158 关键术语/思考题 159 应用题 160 数据分析题/网络练习/网络参考 161 第三篇 金融机构 第8章 金融结构的经济学分析 164 8.1 世界各国金融结构的基本特征 164 8.2 交易成本 167 8.3 信息不对称：逆向选择和道德风险 169 8.4 次品车问题：逆向选择如何影响金融结构 169 8.5 道德风险如何影响债权合约和股权合约的选择 175 8.6 道德风险如何影响债务市场的金融结构 178 本章小结 184 关键术语/思考题 185 应用题 186 数据分析题/网络练习/网络参考 187 第9章 银行业与金融机构管理 188 9.1 银行的资产负债表 188 9.2 银行的基本业务 192 9.3 银行管理的基本原则 195 9.4 信用风险管理 203 9.5 利率风险管理 207 9.6 表外业务活动 209 本章小结 212 关键术语/思考题 213 应用题 214 数据分析题/网络练习 215 网络参考 216 第10章 金融监管的经济学分析 217 10.1 信息不对称与银行监管 217 10.2 金融监管类别 222 本章小结 232 关键术语/思考题 233 应用题/数据分析题 234 网络练习/网络参考 235 第11章 银行业：结构与竞争 236 11.1 银行体系的发展历史 236 11.2 金融创新和“影子银行体系”的发展 239 11.3 美国商业银行业的结构 250 11.4 银行并购与全美范围的银行业 253 11.5 银行业与其他金融服务业的分离 257 11.6 储蓄行业：监管和结构 259 11.7 国际银行业务 261 本章小结 264 关键术语/思考题 265 数据分析题 266 网络练习/网络参考 267 第12章 金融危机 268 12.1 什么是金融危机 268 12.2 历史上美国金融危机的发生机制 269 12.3 2007～2009年的全球金融危机 275 12.4 金融监管的反应 284 12.5 “大而不倒”和未来的监管 286 本章小结 289 关键术语/思考题 290 数据分析题 291 网络练习/网络参考 292 第13章 非银行金融机构 293 13.1 保险业 293 13.2 养老基金 301 13.3 财务公司 304 13.4 证券市场运作 305 13.5 共同基金 307 13.6 对冲基金 309 13.7 私募股权投资基金和风险投资基金 310 13.8 政府金融中介机构 311 本章小结 313 关键术语/思考题 314 应用题/数据分析题 315 网络练习/网络参考 316 第14章 金融衍生工具 317 14.1 避险 317 14.2 远期利率合约 318 14.3 金融期货合约和金融期货市场 320 14.4 期权 327 14.5 互换 334 14.6 信用衍生产品 336 本章小结/关键术语 340 思考题/应用题 341 数据分析题 342 网络练习/网络参考 343 第15章 金融行业中的利益冲突 344 15.1 利益冲突及其重要性 345 15.2 职业道德和利益冲突 345 15.3 利益冲突的种类 346 15.4 市场可以限制利益冲突吗 350 15.5 为了解决利益冲突问题已采取了哪些措施 352 15.6 克服利益冲突的政策的评估框架 354 本章小结 359 关键术语/思考题 360 网络练习/网络参考 361 第四篇 中央银行与货币政策的制定 第16章 中央银行与联邦储备体系 364 16.1 美国联邦储备体系的起源 364 16.2 联邦储备体系的结构 365 16.3 联邦储备体系的独立性 375 16.4 联邦储备体系应该保持独立性吗 377 16.5 解释中央银行的行为 379 16.6 欧洲中央银行的结构与独立性 381 16.7 其他国家中央银行的结构与独立性 383 本章小结 385 关键术语/思考题 386 数据分析题/网络练习/网络参考 387 第17章 货币供给过程 388 17.1 货币供给过程的三个参与者 388 17.2 联邦储备体系的资产负债表 388 17.3 基础货币的控制 390 17.4 多倍存款创造：一个简化的模型 395 17.5 决定货币供给的因素 401 17.6 货币供给过程综述 402 17.7 货币乘数 403 本章小结/关键术语/思考题 409 应用题 410 数据分析题/网络练习 411 网络参考 412 第18章 货币政策工具 413 18.1 准备金市场和联邦基金利率 413 18.2 常规货币政策工具 420 18.3 非常规货币政策工具和量化宽松 427 18.4 欧洲中央银行的货币政策工具 434 本章小结 435 关键术语/思考题 436 应用题 437 数据分析题/网络练习/网络参考 438 第19章 货币政策的实施：战略与策略 439 19.1 物价稳定目标和名义锚 439 19.2 货币政策的其他目标 441 19.3 物价稳定应该是货币政策的首要目标吗 443 19.4 通货膨胀目标制 444 19.5 美联储货币政策战略的变革 450 19.6 全球金融危机中的货币政策战略 454 19.7 中央银行应该试图阻止资产价格泡沫吗 456 19.8 策略：政策工具的选择 460 19.9 策略：泰勒规则 463 本章小结/关键术语 467 思考题 468 应用题/数据分析题 469 网络练习 470 网络参考 471 第五篇 国际金融与货币政策 第20章 外汇市场 474 20.1 外汇市场 474 20.2 长期汇率 477 20.3 短期汇率：供求分析 483 20.4 解释汇率的变动 485 本章小结 494 关键术语/思考题 495 应用题/数据分析题 496 网络练习/网络参考 497 附录20A 利率平价条件 498 第21章 国际金融体系 502 21.1 外汇市场干预 502 21.2 国际收支 506 21.3 国际金融体系下的汇率制度 508 21.4 资本管制 517 21.5 国际货币基金组织的职责 518 21.6 国际因素和货币政策 519 21.7 钉住还是不钉住：作为货币政策战略的汇率目标制 520 本章小结 526 关键术语/思考题 527 应用题 528 数据分析题 529 网络练习/网络参考 530 第六篇 货币理论 第22章 货币数量论、通货膨胀和货币需求 532 22.1 货币数量论 532 22.2 预算赤字和通货膨胀 538 22.3 凯恩斯的货币需求理论 541 22.4 货币需求资产组合理论 542 22.5 货币需求的实证分析 544 本章小结/关键术语/思考题 546 应用题/数据分析题 548 网络练习/网络参考 549 第23章 总需求和总供给分析 550 23.1 总需求 550 23.2 总供给 556 23.3 总供给曲线的移动 558 23.4 总供给和总需求分析中的均衡 562 23.5 总需求冲击导致的均衡变动 566 23.6 均衡变动：总供给（通货膨胀）冲击 569 23.7 国外经济周期AD/AS分析 577 本章小结 581 关键术语/思考题 582 应用题/数据分析题 583 网络练习/网络参考 584 附录23A 菲利普斯曲线和短期总供给曲线 585 第24章 货币政策理论 594 24.1 货币政策对经济冲击的反应 594 24.2 政策制定者怎样主动地稳定经济活动 602 24.3 通货膨胀：无论何时何地都是一种货币现象 603 24.4 通货膨胀型货币政策的根源 604 24.5 零利率下限的货币政策 610 本章小结/关键术语 619 思考题 620 应用题/数据分析题 621 网络练习/网络参考 622 第25章 货币政策传导机制 623 25.1 货币政策传导机制 623 25.2 货币政策的启示 632 本章小结/关键术语/思考题 635 应用题 636 数据分析题/网络练习/网络参考 637 Brief Contents PART 1 Introduction 1 1 Why Study Money, Banking, and Financial Markets ........................... 2 2 An Overview of the Financial System .. 22 3 What Is Money ................... 49 PART 2 Financial Markets 63 4 The Meaning of Interest Rates ........... 64 5 The Behavior of Interest Rates ........ 86 6 The Risk and Term Structure of Interest Rates ............................... 117 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis ............ 141 PART 3 Financial Institutions 163 8 An Economic Analysis of Financial Structure 164 9 Banking and the Management of Financial Institutions ................................... 188 10 Economic Analysis of Financial Regulation ............... 217 11 Banking Industry: Structure and Competition ................................... 236 12 Financial Crises ...................... 268 13 Nonbank Finance ................................. 293 14 Financial Derivatives ........................... 317 15 Conflicts of Interest in the Financial Industry .......... 344 PART 4 Central Banking and the Conduct of Monetary Policy 363 16 Central Banks and the Federal Reserve System .................................. 364 17 The Money Supply Process ................... 388 18 Tools of Monetary Policy ............... 413 19 The Conduct of Monetary Policy: Strategy and Tactics ................................. 439 PART 5 International Finance and Monetary Policy 473 20 The Foreign Exchange Market ......... 474 21 The International Financial System............... 502 PART 6 Monetary Theory 531 22 Quantity Theory, Inflation, and the Demand for Money................................... 532 23 Aggregate Demand and Supply Analysis ......... 550 24 Monetary Policy Theory................ 594 25 Transmission Mechanisms of Monetary Policy ... 623 Additional Chapters on MyLab Economics 1 Financial Crises in Emerging Market Economies 2 The IS Curve 3 The Monetary Policy and Aggregate Demand Curves 4 The Role of Expectations in Monetary Policy 5 The ISLM Model Contents in Detail PART 1 Introduction 1 CHAPTER 1 Why Study Money, Banking, and Financial Markets 2 Why Study Financial Markets ...........2 Debt Markets and Interest Rates ... 3 The Stock Market ......... 3 Why Study Financial Institutions and Banking.................. 5 Structure of the Financial System . 5 Banks and Other Financial Institutions.............................. 6 Financial Innovation..... 6 Financial Crises............6 Why Study Money and Monetary Policy............................7 Money and Business Cycles .......... 7 Money and Inflation.....7 Money and Interest Rates.............. 9 Conduct of Monetary Policy ......... 9 Fiscal Policy and Monetary Policy.................................... Why Study International Finance . 11 The Foreign Exchange Market .... 12 The International Financial System.................................. 13 Money, Banking, and Financial Markets and Your Career............ 14 How We Will Study Money, Banking, and Financial Markets...... 14 Exploring the Web ............................. 15 Concluding Remarks .......... ........................15 Summary 15 . Key Terms 16 . Questions 16 . Applied Problems 17 . Data Analysis Problems 17 . Web Exercises 18 . Web References 18 APPENDIX TO CHAPTER 1 Defining Aggregate Output, Income, the Price Level, and the Inflation Rate 19 Aggregate Output and Income ....... 19 Real Versus Nominal Magnitudes .. 19 Aggregate Price Level......... ............20 Growth Rates and the Inflation Rate .................................. 21 CHAPTER 2 An Overview of the Financial System 22 Function of Financial Markets......... 22 Structure of Financial Markets......... 25 Debt and Equity Markets............25 Primary and Secondary Markets . 25 Exchanges and Over-the-Counter Markets.......................26 Money and Capital Markets........27 Financial Market Instruments.......... 27 Money Market Instruments........27 Following the Financial News Money Market Rates 28 Capital Market Instruments........29 Following the Financial News Capital Market Interest Rates 30 Internationalization of Financial Markets ......................... 31 Global Are U.S. Capital Markets Losing Their Edge 32 International Bond Market, Eurobonds, and Eurocurrencies ...........32 World Stock Markets ..............33 Function of Financial Intermediaries: Indirect Finance............. 33 Following the Financial News World Stock Market Indexes 34 Transaction Costs ...................34 Global The Importance of Financial Intermediaries Relative to Securities Markets: An International Comparison 35 Risk Sharing.36 Asymmetric Information: Adverse Selection and Moral Hazard.......36 Economies of Scope and Conflicts of Interest.........................38 Types of Financial Intermediaries. 38 Depository Institutions.............38 Contractual Savings Institutions........40 Investment Intermediaries........41 Regulation of the Financial System....... 42 Increasing Information Available to Investors..........................42 Ensuring the Soundness of Financial Intermediaries...............43 Financial Regulation Abroad.....45 Summary 45 . Key Terms 46 . Questions 46 . Applied Problems 47 . Data Analysis Problems 48 . Web Exercises 48 . Web References 48 CHAPTER 3 What Is Money 49 Meaning of Money........................... 49 Functions of Money ......................... 50 Medium of Exchange................50 Unit of Account........................51 Store of Value ...........................52 Evolution of the Payments System........ 53 Commodity Money ..................53 Fiat Money...............................53 Checks 53 Electronic Payment...................54 E-Money .................................. 54 FYI Are We Headed for a Cashless Society 55 APPLICATION Will Bitcoin Become the Money of the Future.................................55 Measuring Money............................. 56 The Federal Reserve’s Monetary Aggregates ............................ 56 Following the Financial News The Monetary Aggregates 57 FYI Where Are All the U.S. Dollars 58 Summary 59 . Key Terms 60 . Questions 60 . Applied Problems 61 . Data Analysis Problems 62 . Web Exercises 62 . Web References 62 PART 2 Financial Markets 63 CHAPTER 4 The Meaning of Interest Rates 64 Measuring Interest Rates ................ 64 Present Value............................64 APPLICATION Simple Present Value............................66 APPLICATION How Much Is That Jackpot Worth..................66 Four Types of Credit Market Instruments ............................... 67 Yield to Maturity................................... 68 APPLICATION Yield to Maturity on a Simple Loan..................68 APPLICATION Yield to Maturity and the Yearly Payment on a Fixed-Payment Loan ......70 APPLICATION Yield to Maturity and the Bond Price for a Coupon Bond .................71 APPLICATION Yield to Maturity on a Perpetuity.....................73 APPLICATION Yield to Maturity on a Discount Bond..............74 The Distinction Between Interest Rates and Returns............ 75 Global Negative Interest Rates Japan First, Then the United States, Then Europe 76 Maturity and the Volatility of Bond Returns: Interest-Rate Risk........78 Summary.................................. 79 The Distinction Between Real and Nominal Interest Rates ........................ 80 APPLICATION Calculating Real Interest Rates.........................81 Summary 83 . Key Terms 83 . Questions 83 . Applied Problems 84 . Data Analysis Problems 85 . Web Exercises 85 . Web References 85 CHAPTER 4 APPENDIX Measuring Interest-Rate Risk: Duration Go to MyLab Economics: www.pearson.com/mylab/economics CHAPTER 5 The Behavior of Interest Rates 86 Determinants of Asset Demand................ 86 Wealth.87 Expected Returns .....................87 Risk.....87 Liquidity ..................................88 Theory of Portfolio Choice ...................88 Supply and Demand in the Bond Market ................................ 89 Demand Curve.........................89 Supply Curve ...........................90 Market Equilibrium..................91 Supply and Demand Analysis...............92 Changes in Equilibrium Interest Rates . 92 Shifts in the Demand for Bonds93 Shifts in the Supply of Bonds................96 APPLICATION Changes in the Interest Rate Due to a Change in Expected Inflation: The Fisher Effect................ 98 APPLICATION Changes in the Interest Rate Due to a Business Cycle Expansion....100 APPLICATION Explaining Current Low Interest Rates in Europe, Japan, and the United States: Low Inflation and Secular Stagnation ....................... 101 Supply and Demand in the Market for Money: The Liquidity Preference Framework..............................102 Changes in Equilibrium Interest Rates in the Liquidity Preference Framework........105 Shifts in the Demand for Money......105 Shifts in the Supply of Money.105 APPLICATION Changes in the Equilibrium Interest Rate Due to Changes in Income, the Price Level, or the Money Supply .................. 106 Changes in Income.................107 Changes in the Price Level......107 Changes in the Money Supply............107 Money and Interest Rates.....................108 APPLICATION Does a Higher Rate of Growth of the Money Supply Lower Interest Rates..........................110 Summary 113 . Key Terms 113 . Questions 113 . Applied Problems 114 . Data Analysis Problems 115 . Web Exercises 116 . Web References 116 CHAPTER 5 APPENDIX 1 Models of Asset Pricing Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 5 APPENDIX 2 Applying the Asset Market Approach to a Commodity Market: The Case of Gold Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 5 APPENDIX 3 Loanable Funds Framework Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 6 The Risk and Term Structure of Interest Rates 117 Risk Structure of Interest Rates..............117 Default Risk.................................. 117 FYI Conflicts of Interest at Credit-Rating Agencies and the Global Financial Crisis 121 APPLICATION The Global Financial Crisis and the Baa-Treasury Spread...............122 Liquidity ................................... 122 Income Tax Considerations ..................... 123 Summary... 124 APPLICATION Effects of the Obama Tax Increase on Bond Interest Rates..............124 Term Structure of Interest Rates.................125 Following the Financial News Yield Curves 125 Expectations Theory......... 127 Segmented Markets Theory ................... 130 Liquidity Premium and Preferred Habitat Theories.. 131 Evidence on the Term Structure ................. 134 FYI The Yield Curve as a Forecasting Tool for Inflation and the Business Cycle 135 Summary.................. 135 APPLICATION Interpreting Yield Curves, 1980–2017135 Summary 137 . Key Terms 137 . Questions 137 . Applied Problems 139 . Data Analysis Problems 139 . Web Exercises 140 . Web References 140 CHAPTER 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis 141 Computing the Price of Common Stock.........141 The One-Period Valuation Model ............. 142 The Generalized Dividend Valuation Model... 143 The Gordon Growth Model ....................... 143 How the Market Sets Stock Prices.............144 APPLICATION Monetary Policy and Stock Prices..................................146 APPLICATION The Global Financial Crisis and the Stock Market...........................146 The Theory of Rational Expectations..................146 Formal Statement of the Theory ...................... 148 Rationale Behind the Theory ............... 148 Implications of the Theory ...................... 149 The Efficient Market Hypothesis: Rational Expectations in Financial Markets..........150 Rationale Behind the Hypothesis....................151 Random-Walk Behavior of Stock Prices...............152 Global Should Foreign Exchange Rates Follow a Random Walk 153 APPLICATION Practical Guide to Investing in the Stock Market.........................153 How Valuable Are Published Reports by Investment Advisers...............................153 Should You Be Skeptical of Hot Tips.......................154 FYI Should You Hire an Ape as Your Investment Adviser 155 Do Stock Prices Always Rise When There Is Good News155 Efficient Market Prescription for the Investor..155 Why the Efficient Market Hypothesis Does Not Imply That Financial Markets Are Efficient ........................ 156 APPLICATION What Do Stock Market Crashes Tell Us About the Efficient Market Hypothesis and the Efficiency of Financial Markets.........................157 Behavioral Finance .........................157 Summary 158 . Key Terms 159 . Questions 159 . Applied Problems 160 . Data Analysis Problems 161 . Web Exercises 161 . Web References 161 CHAPTER 7 APPENDIX Evidence on the Efficient Market Hypothesis Go to MyLab Economics, www.pearson.com/mylab/economics PART 3 Financial Institutions 163 CHAPTER 8 An Economic Analysis of Financial Structure 164 Basic Facts About Financial Structure Throughout the World............................164 Transaction Costs......................167 How Transaction Costs Influence Financial Structure......167 How Financial Intermediaries Reduce Transaction Costs..168 Asymmetric Information: Adverse Selection and Moral Hazard...................................169 The Lemons Problem: How Adverse Selection Influences Financial Structure.........169 Lemons in the Stock and Bond Markets..................170 Tools to Help Solve Adverse Selection Problems.....170 FYI The Enron Implosion 172 How Moral Hazard Affects the Choice Between Debt and Equity Contracts............175 Moral Hazard in Equity Contracts: The Principal–Agent Problem............................175 Tools to Help Solve the Principal–Agent Problem.....176 How Moral Hazard Influences Financial Structure in Debt Markets............................178 Tools to Help Solve Moral Hazard in Debt Contracts.......178 Summary..........180 APPLICATION Financial Development and Economic Growth...............................181 FYI The Tyranny of Collateral 182 APPLICATION Is China an example to the Importance of Financial Development................................. 183 Summary 184 . Key Terms 185 . Questions 185 . Applied Problems 186 . Data Analysis Problems 187 . Web Exercises 187 . Web References 187 CHAPTER 9 Banking and the Management of Financial Institutions 188 The Bank Balance Sheet....................188 Liabilities..... 188 Assets ................................... 191 Basic Banking....192 General Principles of Bank Management......................195 Liquidity Management and the Role of Reserves ..... 195 Asset Management.............................. 198 Liability Management .................. 199 Capital Adequacy Management ............................... 200 APPLICATION Strategies for Managing Bank Capital ..202 APPLICATION How a Capital Crunch Caused a Credit Crunch During the Global Financial Crisis.................... 203 Managing Credit Risk...203 Screening and Monitoring .............................. 204 Long-Term Customer Relationships.................... 205 Loan Commitments................................... 206 Collateral and Compensating Balances ........... 206 Credit Rationing...................................206 Managing Interest-Rate Risk........................207 Gap and Duration Analysis................... 208 APPLICATION Strategies for Managing Interest-Rate Risk..................................209 Off-Balance-Sheet Activities.........................209 Loan Sales .................... 210 Generation of Fee Income ................ 210 Trading Activities and Risk Management Techniques.............210 Global Barings, Daiwa, Sumitomo, Société Générale, and JP Morgan Chase: Rogue Traders and the Principal–Agent Problem 211 Summary 212 . Key Terms 213 . Questions 213 . Applied Problems 214 . Data Analysis Problems 215 . Web Exercises 215 . Web References 216 CHAPTER 9 APPENDIX 1 Duration Gap Analysis Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 9 APPENDIX 2 Measuring Bank Performance Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 10 Economic Analysis of Financial Regulation 217 Asymmetric Information as a Rationale for Financial Regulation.................................217 Government Safety Net ..................217 Global The Spread of Government Deposit Insurance Throughout the World: Is This a Good Thing 219 Drawbacks of the Government Safety Net...............220 Types of Financial Regulation .............222 Restrictions on Asset Holdings .......................222 Capital Requirements......................223 Global Where Is the Basel Accord Heading After the Global Financial Crisis 224 Prompt Corrective Action......................225 Financial Supervision: Chartering and Examination...........................225 Assessment of Risk Management ........226 Disclosure Requirements........................227 Consumer Protection.....................228 Restrictions on Competition..........228 Summary.................................229 Global International Financial Regulation 230 Summary 232 . Key Terms 233 . Questions 233 . Applied Problems 234 . Data Analysis Problems 234 . Web Exercises 235 . Web References 235 CHAPTER 10 APPENDIX 1 The 1980s Banking and Savings and Loan Crisis Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 10 APPENDIX 2 Banking Crises Throughout the World Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 11 Banking Industry: Structure and Competition 236 Historical Development of the Banking System............236 Multiple Regulatory Agencies ........238 Financial Innovation and the Growth of the “Shadow Banking System”...............................239 Responses to Changes in Demand Conditions: Interest-Rate Volatility................................240 Responses to Changes in Supply Conditions: Information Technology...............................241 Securitization and the Shadow Banking System...............................243 Avoidance of Existing Regulations ..................... 245 FYI Bruce Bent and the Money Market Mutual Fund Panic of 2008 246 Financial Innovation and the Decline of Traditional Banking......................247 Structure of the U.S. Commercial Banking Industry......250 Restrictions on Branching................................. 252 Response to Branching Restrictions ..................... 252 Bank Consolidation and Nationwide Banking..................253 The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 .......................... 255 What Will the Structure of the U.S. Banking Industry Look Like in the Future ................. 255 Global Comparison of Banking Structure in the United States and Abroad 256 Are Bank Consolidation and Nationwide Banking Good Things... 256 Separation of the Banking and Other Financial Service Industries...............................257 Erosion of Glass-Steagall........... 257 The Gramm-Leach-Bliley Financial Services Modernization Act of 1999: Repeal of Glass-Steagall................................258 Implications for Financial Consolidation .... 258 Separation of Banking and Other Financial Services Industries Throughout the World....... 258 FYI The Global Financial Crisis and the Demise of Large, Free-Standing Investment Banks 259 Thrift Industry: Regulation and Structure259 Savings and Loan Associations............. 260 Mutual Savings Banks............................... 260 Credit Unions............................... 260 International Banking .............261 Eurodollar Market .......................... 261 Global Ironic Birth of the Eurodollar Market 262 Structure of U.S. Banking Overseas....................262 Foreign Banks in the United States ............. 263 Summary 264 . Key Terms 265 . Questions 265 . Data Analysis Problems 266 . Web Exercises 267 . Web References 267 CHAPTER 12 Financial Crises 268 What Is a Financial Crisis.....................268 Dynamics of Financial Crises ..............269 Stage One: Initial Phase.......................269 Stage Two: Banking Crisis..................271 Stage Three: Debt Deflation....................272 APPLICATION The Mother of All Financial Crises: The Great Depression.............273 Stock Market Crash ................................... 273 Bank Panics........................273 Continuing Decline in Stock Prices........274 Debt Deflation............................274 International Dimensions................275 The Global Financial Crisis of 2007–2009.............275 Causes of the 2007–2009 Financial Crisis.............275 FYI Collateralized Debt Obligations (CDOs) 276 Effects of the 2007–2009 Financial Crisis.........277 Inside the Fed Was the Fed to Blame for the Housing Price Bubble 278 Global The European Sovereign Debt Crisis 281 Height of the 2007–2009 Financial Crisis ....................................282 Government Intervention and the Recovery.......283 Global Worldwide Government Bailouts During the 2007–2009 Financial Crisis 283 Response of Financial Regulation..........................284 Macroprudential Versus Microprudential Supervision 284 Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 .............................285 Too-Big-to-Fail and Future Regulation ...........................286 What Can Be Done About the Too-Big-to-Fail Problem................287 Beyond Dodd-Frank: Where Might Regulation Head in the Future...................................287 Summary 289 . Key Terms 290 . Questions 290 . Data Analysis Problems 291 . Web Exercises 292 . Web Reference 292 CHAPTER 13 Nonbank Finance 293 Insurance........................293 Life Insurance.....................293 Property and Casualty Insurance.............294 The Competitive Threat from the Banking Industry..................................296 Credit Insurance...........................296 FYI The AIG Blowup 297 FYI The Global Financial Crisis and the Monoline Insurers 298 APPLICATION Insurance Management....................................298 Screening ..........................299 Risk-Based Premiums..................299 Restrictive Provisions.................299 Prevention of Fraud.........................300 Cancellation of Insurance...................300 Deductibles ............................300 Coinsurance ...........................300 Limits on the Amount of Insurance.............300 Summary.....................301 Pension Funds..................................301 Private Pension Plans..............302 Public Pension Plans............... 302 FYI Should Social Security Be Privatized 303 Finance Companies........................304 Securities Market Operations..................305 Investment Banking............................ 305 Securities Brokers and Dealers306 Organized Exchanges ............. 306 Mutual Funds ...................................307 FYI Sovereign Wealth Funds: Are They a Danger 308 Money Market Mutual Funds . 309 Hedge Funds ....................................309 Private Equity and Venture Capital Funds..............................310 Government Financial Intermediation ...................................311 Federal Credit Agencies..........311 FYI The Global Financial Crisis and the Bailout of Fannie Mae and Freddie Mac 312 Summary 313 . Key Terms 314 . Questions 314 . Applied Problems 315 . Data Analysis Problems 315 . Web Exercises 316 . Web References 316 CHAPTER 14 Financial Derivatives 317 Hedging ........................................317 Interest-Rate Forward Contracts.........................318 APPLICATION Hedging with Interest-Rate Forward Contracts ...............................318 Pros and Cons of Forward Contracts .................................... 319 Financial Futures Contracts and Markets...............................320 APPLICATION Hedging with Financial Futures.....................321 Organization of Trading in Financial Futures Markets .......... 323 The Globalization of Financial Futures Markets.................... 324 Explaining the Success of Futures Markets ........................... 324 APPLICATION Hedging Foreign Exchange Risk....................326 Hedging Foreign Exchange Risk with Forward Contracts ................. 326 Hedging Foreign Exchange Risk with Futures Contracts................... 326 Options ........................................327 Options Contracts .............................. 328 Profits and Losses on Option and Futures Contracts ........................ 328 APPLICATION Hedging with Future Options........................331 Factors Affecting Option Premiums . 332 Summary................................ 333 Swaps........................................334 Interest-Rate Swap Contracts..............334 APPLICATION Hedging with Interest-Rate Swaps..................335 Advantages of Interest-Rate Swaps...335 Disadvantages of Interest-Rate Swaps...........................336 Financial Intermediaries in Interest-Rate Swaps....................336 Credit Derivatives........................................336 Credit Options ..............................337 Credit Swaps..................................337 Credit-Linked Notes.......................338 APPLICATION Lessons from the Global Financial Crisis: When Are Financial Derivatives Likely to Be a Worldwide Ticking Time Bomb .............................. 338 Summary 340 . Key Terms 340 . Questions 341 . Applied Problems 341 . Data Analysis Problems 342 . Web Exercises 343 . Web References 343 CHAPTER 15 Conflicts of Interest in the Financial Industry 344 What Are Conflicts of Interest, and Why Are They Important 345 Why Do We Care About Conflicts of Interest..........................345 Ethics and Conflicts of Interest............345 Types of Conflicts of Interest................346 Underwriting and Research in Investment Banking ..................346 Auditing and Consulting in Accounting Firms .........................347 Credit Assessment and Consulting in Credit-Rating Agencies...347 FYI The Collapse of Arthur Andersen 348 Universal Banking ..........................348 FYI Why Do Issuers of Securities Pay to Have Their Securities Rated 349 FYI Banksters 350 Can the Market Limit Exploitation of Conflicts of Interest..350 What Has Been Done to Remedy Conflicts of Interest....................352 Sarbanes-Oxley Act of 2002...........353 Global Legal Settlement of 2002.....353 Dodd-Frank Bill of 2010................354 A Framework for Evaluating Policies to Remedy Conflicts of Interest........................354 Approaches to Remedying Conflicts of Interest.........................355 APPLICATION Evaluating Sarbanes-Oxley, the Global Legal Settlement, and the Dodd-Frank Bill ............... 357 Summary 359 . Key Terms 360 . Questions 360 . Web Exercises 361 . Web References 361 CHAPTER 16 Central Banks and the Federal Reserve System 364 Origins of the Federal Reserve System...364 Inside the Fed The Political Genius of the Founders of the Federal Reserve System 365 Structure of the Federal Reserve System....................................365 Federal Reserve Banks .................... 366 Inside the Fed The Special Role of the Federal Reserve Bank of New York 368 Member Banks ............................... 369 Board of Governors of the Federal Reserve System.................... 370 Federal Open Market Committee (FOMC) ............................... 370 Inside the Fed The Role of the Research Staff 371 Inside the Fed The FOMC Meeting 372 Inside the Fed Green, Blue, Teal, and Beige: What Do These Colors Mean at the Fed 373 Why the Chair of the Board of Governors Really Runs the Show ............... 373 Inside the Fed Styles of Federal Reserve Chairs: Bernanke and Yellen Versus Greenspan 374 How Independent Is the Fed .............375 Should the Fed Be Independent.......377 The Case for Independence ............ 377377 The Case Against Independence ..... 378378 Central Bank Independence and Macroeconomic Performance Throughout the World .............. 379 Explaining Central Bank Behavior ..................379 Inside the Fed The Evolution of the Fed’s Communication Strategy 380 Structure and Independence of the European Central Bank ................381 Differences Between the European System of Central Banks and the Federal Reserve System.......................... 381 Governing Council.....................................382 How Independent Is the ECB.................... 382 Structure and Independence of Other Foreign Central Banks..383 Bank of Canada .............................. 383 Bank of England.............................383 Bank of Japan ................................. 384 The Trend Toward Greater Independence 385 Summary 385 . Key Terms 386 . Questions 386 . Data Analysis Problems 387 . Web Exercises 387 . Web References 387 CHAPTER 17 The Money Supply Process 388 Three Players in the Money Supply Process..............................388 The Fed’s Balance Sheet ........................388 Liabilities........................................389 Assets........................................390 Control of the Monetary Base..................390 Federal Reserve Open Market Operations.........................391 Shifts from Deposits into Currency...........392 Loans to Financial Institutions..................393 Other Factors That Affect the Monetary Base.................................393 Overview of the Fed’s Ability to Control the Monetary Base...........394 Multiple Deposit Creation: A Simple Model..................................395 Deposit Creation: The Single Bank.......................395 Deposit Creation: The Banking System.................396 Deriving the Formula for Multiple Deposit Creation......................399 Critique of the Simple Model ...................400 Factors That Determine the Money Supply....................................401 Changes in the Nonborrowed Monetary Base, MBn........................401 Changes in Borrowed Reserves, BR, from the Fed..........................401 Changes in the Required Reserve Ratio, rr 402 Changes in Excess Reserves......................402 Changes in Currency Holdings.............................402 Overview of the Money Supply Process................402 The Money Multiplier.........................403 Deriving the Money Multiplier.................403 Intuition Behind the Money Multiplier.....405 Money Supply Response to Changes in the Factors........................406 APPLICATION Quantitative Easing and the Money Supply, 2007–2017..................407 Summary 409 . Key Terms 409 . Questions 409 . Applied Problems 410 . Data Analysis Problems 411 . Web Exercises 411 . Web References 412 CHAPTER 17 APPENDIX 1 The Fed’s Balance Sheet and the Monetary Base Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 17 APPENDIX 2 The M2 Money Multiplier Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 17 APPENDIX 3 Explaining the Behavior of the Currency Ratio Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 17 APPENDIX 4 The Great Depression Bank Panics, 1930–1933, and the Money Supply Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 18 Tools of Monetary Policy 413 The Market for Reserves and the Federal Funds Rate .................413 Demand and Supply in the Market for Reserves ............................ 414 How Changes in the Tools of Monetary Policy Affect the Federal Funds Rate.............................. 415 APPLICATION How the Federal Reserve’s Operating Procedures Limit Fluctuations in the Federal Funds Rate ...... 419 Conventional Monetary Policy Tools...........420 Open Market Operations..........................421 Inside the Fed A Day at the Trading Desk 422 Discount Policy and the Lender of Last Resort...............................423 Inside the Fed Using Discount Policy to Prevent a Financial Panic 425 Reserve Requirements............................... 426 Interest on Reserves..................................426 Relative Advantages of the Different Tools ........................ 427 Nonconventional Monetary Policy Tools and Quantitative Easing ..............................427 Liquidity Provision...................................428 Large-Scale Asset Purchases......................428 Inside the Fed Fed Lending Facilities During the Global Financial Crisis 429 Quantitative Easing Versus Credit Easing.............. 430 Forward Guidance.................................... 432 Negative Interest Rates on Banks’ Deposits .................................... 433 Monetary Policy Tools of the European Central Bank.................434 Open Market Operations..........................434 Lending to Banks......................... 434 Interest on Reserves..................................435 Reserve Requirements............................... 435 Summary 435 . Key Terms 436 . Questions 436 . Applied Problems 437 . Data Analysis Problems 438 . Web Exercises 438 . Web References 438 CHAPTER 19 The Conduct of Monetary Policy: Strategy and Tactics 439 The Price Stability Goal and the Nominal Anchor........................439 The Role of a Nominal Anchor ................. 440 The Time-Inconsistency Problem.......................... 440 Other Goals of Monetary Policy ...................441 High Employment and Output Stability ............... 441 Economic Growth .................................... 442 Stability of Financial Markets ...................442 Interest-Rate Stability................................442 Stability in Foreign Exchange Markets..................443 Should Price Stability Be the Primary Goal of Monetary Policy...................................443 Hierarchical Versus Dual Mandates.......................443 Price Stability as the Primary, Long-Run Goal of Monetary Policy..............444 Inflation Targeting....................444 Inflation Targeting in New Zealand, Canada, and the United Kingdom..............................445 Advantages of Inflation Targeting.........................447 Disadvantages of Inflation Targeting.....................449 The Evolution of the Federal Reserve’s Monetary Policy Strategy.................................450 The Fed’s “Just Do It” Monetary Policy Strategy.............................450 The Long Road to Inflation Targeting ...................452 Inside the Fed Ben Bernanke’s Advocacy of Inflation Targeting 453 Global The European Central Bank’s Monetary Policy Strategy 453 Lessons for Monetary Policy Strategy from the Global Financial Crisis.......................454 Implications for Inflation Targeting......................455 Should Central Banks Try to Stop Asset-Price Bubbles..............456 Two Types of Asset-Price Bubbles..........................456 The Debate over Whether Central Banks Should Try to Pop Bubbles..................................457 Tactics: Choosing the Policy Instrument.................460 Criteria for Choosing the Policy Instrument ..................................462 Tactics: The Taylor Rule....................................463 Inside the Fed The Fed’s Use of the Taylor Rule 466 Inside the Fed Fed Watchers 466 Summary 467 . Key Terms 467 . Questions 468 . Applied Problems 469 . Data Analysis Problems 469 . Web Exercises 470 . Web References 471 CHAPTER 19 APPENDIX 1 Monetary Targeting Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 19 APPENDIX 2 A Brief History of Federal Reserve Policymaking Go to MyLab Economics, www.pearson.com/mylab/economics PART 5 International Finance and Monetary Policy 473 CHAPTER 20 The Foreign Exchange Market 474 Foreign Exchange Market...............................474 Following the Financial News Foreign Exchange Rates 475 What Are Foreign Exchange Rates........... 475 Why Are Exchange Rates Important........475 How Is Foreign Exchange Traded............ 476 Exchange Rates in the Long Run...................477 Theory of Purchasing Power Parity ........... 477 APPLICATION Burgernomics: Big Macs and PPP................479 Factors That Affect Exchange Rates in the Long Run...................... 481 Exchange Rates in the Short Run: A Supply and Demand Analysis.483 Supply Curve for Domestic Assets............483 Demand Curve for Domestic Assets...................... 483 Equilibrium in the Foreign Exchange Market ................................ 485 Explaining Changes in Exchange Rates...................485 Shifts in the Demand for Domestic Assets......................... 485 Recap: Factors That Change the Exchange Rate ............................. 488 APPLICATION Effects of Changes in Interest Rates on the Equilibrium Exchange Rate ........ 490 APPLICATION The Global Financial Crisis and the Dollar 492 APPLICATION Brexit and the British Pound.......................493 Summary 494 . Key Terms 495 . Questions 495 . Applied Problems 496 . Data Analysis Problems 496 . Web Exercises 497 . Web References 497 APPENDIX TO CHAPTER 20 The Interest Parity Condition 498 Comparing Expected Returns on Domestic and Foreign Assets................498 Interest Parity Condition .............500 CHAPTER 21 The International Financial System 502 Intervention in the Foreign Exchange Market...............................502 Foreign Exchange Intervention and the Money Supply.................. 502 Inside the Fed A Day at the Federal Reserve Bank of New York’s Foreign Exchange Desk 503 Unsterilized Intervention..........................505 Sterilized Intervention .............................. 506 Balance of Payments...............506 Current Account ............. 507 Financial Account .................................... 507 Global Should We Worry About the Large U.S. Current Account Deficit 508 Exchange Rate Regimes in the International Financial System.508 Gold Standard ..... 509 The Bretton Woods System...................................509 How a Fixed Exchange Rate Regime Works...................................510 Speculative Attacks...................................512 APPLICATION The Foreign Exchange Crisis of September 1992............................512 The Policy Trilemma.................................514 APPLICATION How Did China Accumulate $4 Trillion of International Reserves ................................515 Monetary Unions.........................515 Managed Float.................516 Global Will the Euro Survive 516 Capital Controls............517 Controls on Capital Outflows...................517 Controls on Capital Inflows......................517 The Role of the IMF.................518 Should the IMF Act as an International Lender of Last Resort ..................518 International Considerations and Monetary Policy.....................519 Direct Effects of the Foreign Exchange Market on Monetary Policy........................519 Exchange Rate Considerations..................520 To Peg or Not to Peg: Exchange-Rate Targeting as an Alternative Monetary Policy Strategy ........................ 520 Advantages of Exchange-Rate Targeting................520 Disadvantages of Exchange-Rate Targeting....................................521 When Is Exchange-Rate Targeting Desirable for Industrialized Countries..........................523 When Is Exchange-Rate Targeting Desirable for Emerging Market Countries ....................524 Currency Boards..............524 Global Argentina’s Currency Board 525 Dollarization ...................525 Summary 526 . Key Terms 527 . Questions 527 . Applied Problems 528 . Data Analysis Problems 529 . Web Exercises 530 . Web References 530 PART 6 Monetary Theory 531 CHAPTER 22 Quantity Theory, Inflation, and the Demand for Money 532 Quantity Theory of Money.............................532 Velocity of Money and Equation of Exchange................................532 From the Equation of Exchange to the Quantity Theory of Money............534 Quantity Theory and the Price Level ....................535 Quantity Theory and Inflation..............................535 APPLICATION Testing the Quantity Theory of Money.......536 Budget Deficits and Inflation.........................538 Government Budget Constraint................538 Hyperinflation.................540 APPLICATION The Zimbabwean Hyperinflation................540 Keynesian Theories of Money Demand .....541 Transactions Motive.................................. 541 Precautionary Motive................................ 541 Speculative Motive ................................... 541 Putting the Three Motives Together .......... 541 Portfolio Theories of Money Demand........542 Theory of Portfolio Choice and Keynesian Liquidity Preference.....543 Other Factors That Affect the Demand for Money.......................... 543 Summary............. 544 Empirical Evidence for the Demand for Money ...........................544 Interest Rates and Money Demand ........... 544 Stability of Money Demand ...................... 545 Summary 546 . Key Terms 546 . Questions 546 . Applied Problems 548 . Data Analysis Problems 548 . Web Exercises 549 . Web References 549 CHAPTER 22 APPENDIX 1 The Baumol-Tobin and Tobin Mean Variance Models of the Demand for Money Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 22 APPENDIX 2 Empirical Evidence on the Demand for Money Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 23 Aggregate Demand and Supply Analysis 550 Aggregate Demand......550 Following the Financial News Aggregate Output, Unemployment, and Inflation 551 Deriving the Aggregate Demand Curve................. 551 Factors That Shift the Aggregate Demand Curve............................552 FYI What Does Autonomous Mean 553 Aggregate Supply.........556 Long-Run Aggregate Supply Curve...........556 Short-Run Aggregate Supply Curve .......... 556 Price Stickiness and the Short-Run Aggregate Supply Curve..........558 Shifts in the Aggregate Supply Curves.........558 Shifts in the Long-Run Aggregate Supply Curve ............................ 558 Shifts in the Short-Run Aggregate Supply Curve............................559 Equilibrium in Aggregate Demand and Supply Analysis.............562 Short-Run Equilibrium.............................563 How the Short-Run Equilibrium Moves to the Long-Run Equilibrium over Time.......563 Self-Correcting Mechanism................................... 566 Changes in Equilibrium: Aggregate Demand Shocks...................566 APPLICATION The Volcker Disinflation, 1980–1986.....................567 APPLICATION Negative Demand Shocks, 2001–2004....................569 Changes in Equilibrium: Aggregate Supply (Inflation) Shocks...............569 Temporary Supply Shocks........................569 APPLICATION Negative Supply Shocks, 1973–1975 and 1978–1980 .....................572 Permanent Supply Shocks and Real Business Cycle Theory...........572 APPLICATION Positive Supply Shocks, 1995–1999............575 Conclusions ....................576 APPLICATION Negative Supply and Demand Shocks and the 2007–2009 Financial Crisis.......................577 AD/AS Analysis of Foreign Business Cycle Episodes.....................577 APPLICATION The United Kingdom and the 2007–2009 Financial Crisis .............579 APPLICATION China and the 2007–2009 Financial Crisis.............580 Summary 581 . Key Terms 582 . Questions 582 . Applied Problems 583 . Data Analysis Problems 583 . Web Exercises 584 . Web References 584 APPENDIX TO CHAPTER 23 The Phillips Curve and the Short-Run Aggregate Supply Curve 585 The Phillips Curve ....................585 Phillips Curve Analysis in the 1960s ....................585 FYI The Phillips Curve Trade-off and Macroeconomic Policy in the 1960s 587 The Friedman-Phelps Phillips Curve Analysis ...............................587 The Phillips Curve After the 1960s.......................589 The Modern Phillips Curve ..................................589 The Modern Phillips Curve with Adaptive (Backward-Looking) Expectations ....................590 The Short-Run Aggregate Supply Curve.................591 CHAPTER 23 APPENDIX 1 The Effects of Macroeconomic Shocks on Asset Prices Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 23 APPENDIX 2 Aggregate Demand and Supply: A Numerical Example Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 23 APPENDIX 3 The Algebra of the Aggregate Demand and Supply Model Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 23 APPENDIX 4 The Taylor Principle and Inflation Stability Go to MyLab Economics, www.pearson.com/mylab/economics CHAPTER 24 Monetary Policy Theory 594 Response of Monetary Policy to Shocks.................594 Response to an Aggregate Demand Shock......................... 595 Response to a Permanent Supply Shock................ 597 Response to a Temporary Supply Shock ............... 599 The Bottom Line: The Relationship Between Stabilizing Inflation and Stabilizing Economic Activity ............... 602 How Actively Should Policymakers Try to Stabilize Economic Activity.....................602 Lags and Policy Implementation...............602 Inflation: Always and Everywhere a Monetary Phenomenon...603 FYI The Activist/Nonactivist Debate Over the Obama Fiscal Stimulus Package 604 Causes of Inflationary Monetary Policy..................604 High Employment Targets and Inflation...............604 APPLICATION The Great Inflation ........................608 Monetary Policy at the Zero Lower Bound........................610 Deriving the Aggregate Demand Curve with the Zero Lower Bound ................................... 610 The Disappearance of the Self-Correcting Mechanism at the Zero Lower Bound.................612 APPLICATION Nonconventional Monetary Policy and Quantitative Easing................613 Liquidity Provision...................................614 Asset Purchases and Quantitative Easing .. 615 Management of Expectations....................616 APPLICATION Abenomics and the Shift in Japanese Monetary Policy in 2013.........................617 Summary 619 . Key Terms 619 . Questions 620 . Applied Problems 621 . Data Analysis Problems 621 . Web Exercises 622 . Web Reference 622 CHAPTER 25 Transmission Mechanisms of Monetary Policy 623 Transmission Mechanisms of Monetary Policy..............................623 Traditional Interest-Rate Channels ............ 624 Other Asset Price Channels ...................... 625 Credit View ..................... 628 FYI Consumers’ Balance Sheets and the Great Depression 630 Why Are Credit Channels Likely to Be Important......................... 631 APPLICATION The Great Recession....................................632 Lessons for Monetary Policy..........................632 APPLICATION Applying the Monetary Policy Lessons to Japan’s Two Lost Decades...................634 Summary 635 . Key Terms 635 . Questions 635 . Applied Problems 636 . Data Analysis Problems 637 . Web Exercises 637 . Web References 637 CHAPTER 25 APPENDIX Evaluating Empirical Evidence: The Debate Over the Importance of Money in Economic Fluctuations Go to MyLab Economics, www.pearson.com/mylab/economics Additional Chapters on Mylab Economics The following chapters and appendices are available on MyLab Economics www.pearson.com/mylab/economics CHAPTER 1 Financial Crises in Emerging Market Economies 1 Dynamics of Financial Crises in Emerging Market Economies ....................................1 Stage One: Initial Phase................................1 Stage Two: Currency Crises ..........................5 Stage Three: Full-Fledged Financial Crisis................6 Mismanaged APPLICATION Crisis in Republic of Korea, 1997–1998 ........7 Financial Liberalization/Globalization Mismanaged...........................8 Perversion of the Financial Liberalization/Globalization Process: Chaebols and the Republic of Korean Crisis .......9 Stock Market Decline and Failure of Firms Increase Uncertainty .....10 Adverse Selection and Moral Hazard Problems Worsen and the Economy Contracts...............................11 Currency Crisis Ensues ..............................11 Final Stage: Currency Crisis Triggers Full-Fledged Financial Crisis..............11 Recovery Commences.................................13 APPLICATION The Argentine Financial Crisis, 2001–2002..............13 Severe Fiscal Imbalances ............................13 Adverse Selection and Moral Hazard Problems Worsen...................14 Bank Panic Begins .........................14 Currency Crisis Ensues ..............................14 Currency Crisis Triggers Full-Fledged Financial Crisis ....................15 Recovery Begins.............................17 Global When an Advanced Economy Is Like an Emerging Market Economy: The Icelandic Financial Crisis of 2008 18 Preventing Emerging Market Financial Crises.................................. 18 Beef Up Prudential Regulation and Supervision of Banks................. 18 Encourage Disclosure and Market-Based Discipline.........................19 Limit Currency Mismatch........................... 19 Sequence Financial Liberalization............... 20 Summary 20 . Key Terms 20 . Questions 21 CHAPTER 2 The IS Curve 1 Planned Expenditure and Aggregate Demand ...................................1 The Components of Aggregate Demand ....................2 Consumption Expenditure ........................... 2 FYI Meaning of the Word Investment 3 Planned Investment Spending ...................... 3 Government Purchases and Taxes................. 5 Net Exports.............6 Goods Market Equilibrium ..................................7 Solving for Goods Market Equilibrium.....................7 Deriving the IS Curve ................................... 8 Understanding the IS Curve................................8 What the IS Curve Tells Us: Intuition ....................... 8 What the IS Curve Tells Us: Numerical Example ............................... 8 Why the Economy Heads Toward the Equilibrium..........................10 Factors that Shift the IS Curve.......................... 10 Changes in Government Purchases......................... 10 APPLICATION The Vietnam War Buildup, 1964–1969.........11 Changes in Taxes...............12 APPLICATION The Fiscal Stimulus Package of 2009............13 Changes in Autonomous Spending............. 14 Changes in Financial Frictions ................... 16 Summary of Factors That Shift the IS Curve .................................... 16 Summary 16 . Key Terms 16 . Questions 17 . Applied Problems 18 . Data Analysis Problems 19 . Web Exercises 20 . Web References 20 CHAPTER 3 The Monetary Policy and Aggregate Demand Curves 1 The Federal Reserve and Monetary Policy......1 The Monetary Policy Curve.................................2 The Taylor Principle: Why the Monetary Policy Curve Has an Upward Slope.........................2 Shifts in the MP Curve.................................. 4 Movements Along Versus Shifts in the MP Curve............................... 5 APPLICATION Movement Along the MP Curve: The Rise in the Federal Funds Rate Target, 2004–2006 ...................................5 APPLICATION Shift in the MP Curve: Autonomous Monetary Easing at the Onset of the Global Financial Crisis.............5 The Aggregate Demand Curve...........................6 Deriving the Aggregate Demand Curve Graphically...........................7 Factors That Shift the Aggregate Demand Curve................................7 FYI Deriving the Aggregate Demand Curve Algebraically 7 Summary 12 . Key Terms 12 . Questions 12 . Applied Problems 13 . Data Analysis Problems 14 . Web Exercises 15 . Web References 15 CHAPTER 4 The Role of Expectations in Monetary Policy 1 Lucas Critique of Policy Evaluation ...................1 Econometric Policy Evaluation.....................2 APPLICATION The Term Structure of Interest Rates...............2 Policy Conduct: Rules or Discretion ...............3 Discretion and the Time-Inconsistency Problem................................3 Types of Rules..........4 The Case for Rules...............4 FYI The Political Business Cycle and Richard Nixon 5 The Case for Discretion ................................5 Constrained Discretion.................................6 Global The Demise of Monetary Targeting in Switzerland 6 The Role of Credibility and a Nominal Anchor ..................................7 Benefits of a Credible Nominal Anchor.....................7 Credibility and Aggregate Demand Shocks...............8 Credibility and Aggregate Supply Shocks ...............10 A Tale of Three Oil Price Shocks.................11 Credibility and Anti-Inflation Policy.......................13 Global Ending the Bolivian Hyperinflation: A Successful Anti-Inflation Program 14 APPLICATION Credibility and the Reagan Budget Deficits...............15 Approaches to Establishing Central Bank Credibility..................... 16 Nominal GDP Targeting .............................16 Inside the Fed The Appointment of Paul Volcker, Anti-Inflation Hawk 17 Appoint “Conservative” Central Bankers.....17 Summary 18 . Key Terms 18 . Questions 18 . Applied Problems 19 . Data Analysis Problems 19 . Web Exercises 20 CHAPTER 5 The ISLM Model 1 Keynes’ Fixed Price Level Assumption and the IS Curve..................1 The LM Curve ..................... 1 Equilibrium in the Market for Money: The LM Curve........................ 2 ISLM Approach to Aggregate Output and Interest Rates.................4 Factors That Cause the LM Curve to Shift ...................5 Changes in Equilibrium Level of the Interest Rate and Aggregate Output......................7 Response to a Change in Monetary Policy................. 7 Response to a Change in Fiscal Policy....................... 8 APPLICATION The Economic Stimulus Act of 2008 ..........................9 Effectiveness of Monetary Versus Fiscal Policy................................ 11 Monetary Policy Versus Fiscal Policy: The Case of Complete Crowding Out ......................... 11 APPLICATION Targeting Money Supply Versus Interest Rates...................................13 ISLM Model in the Long Run ........................... 16 Summary 18 . Key Terms 19 . Questions and Applied Problems 17 . Web Exercises 19 . Web References 20 APPENDIX TO WEB CHAPTER 5 Algebra of The ISLM Model .........21 Basic Closed-Economy ISLM Model ...............................21 IS and LM Curves ................. 22 Solution of the Model ........... 22 Implications ......................... 22 Open-Economy ISLM Model .......23 Implications ......................................24 CHAPTER APPENDICES Chapter 4: Measuring Interest-Rate Risk: Duration Chapter 5: Models of Asset Pricing Chapter 5: Applying the Asset Market Approach to a Commodity Market: The Case of Gold Chapter 5: Loanable Funds Framework Chapter 7: Evidence on the Efficient Market Hypothesis Chapter 9: Duration Gap Analysis Chapter 9: Measuring Bank Performance Chapter 10: The 1980s Banking and Savings and Loan Crisis Chapter 10: Banking Crises Throughout the World Chapter 17: The Fed’s Balance Sheet and the Monetary Base Chapter 17: The M2 Money Multiplier Chapter 17: Explaining the Behavior of the Currency Ratio Chapter 17: The Great Depression Bank Panics, 1930–1933, and the Money Supply Chapter 19: Monetary Targeting Chapter 19: A Brief History of Federal Reserve Policymaking Chapter 22: The Baumol-Tobin and Tobin Mean-Variance Models of the Demand for Money Chapter 22: Empirical Evidence on the Demand for Money Chapter 23: The Effects of Macroeconomic Shocks on Asset Prices Chapter 23: Aggregate Demand and Supply: A Numerical Example Chapter 23: The Algebra of the Aggregate Demand and Supply Model Chapter 23: The Taylor Principle and Inflation Stability Chapter 25: Evaluating Empirical Evidence: The Debate Over the Importance of Money in Economic Fluctuations |