Why-Study-Money-Banking-课件(PPT 42页)

1、Chapter 1Why Study Money, Banking, and Financial Markets?第1页，共42页。Why Study Money, Banking, and Financial MarketsTo examine how financial markets such as bond, stock and foreign exchange markets workTo examine how financial institutions such as banks and insurance companies workTo examine the role o

2、f money in the economy第2页，共42页。Financial MarketsMarkets in which funds are transferred from people who have an excess of available funds to people who have a shortage of funds第3页，共42页。The Bond Market and Interest RatesA security (financial instrument) is a claim on the issuers future income or asset

3、sA bond is a debt security that promises to make payments periodically for a specified period of timeAn interest rate is the cost of borrowing or the price paid for the rental of funds第4页，共42页。FIGURE 1 Interest Rates on Selected Bonds, 19502008Sources: Federal Reserve Bulletin; /releases/H15/data.ht

4、m.第5页，共42页。The Stock MarketCommon stock represents a share of ownership in a corporationA share of stock is a claim on the earnings and assets of the corporation第6页，共42页。FIGURE 2 Stock Prices as Measured by the Dow Jones Industrial Average, 19502008Source: Dow Jones Indexes: /?u.第7页，共42页。Financial I

5、nstitutions and BankingFinancial Intermediaries: institutions that borrow funds from people who have saved and make loans to other people:Banks: accept deposits and make loansOther Financial Institutions: insurance companies, finance companies, pension funds, mutual funds and investment banksFinanci

6、al Innovation: in particular, the advent of the information age and e-finance第8页，共42页。Financial CrisesFinancial crises are major disruptions in financial markets that are characterized by sharp declines in asset prices and the failures of many financial and nonfinancial firms.第9页，共42页。Money and Busi

7、ness CyclesEvidence suggests that money plays an important role in generating business cyclesRecessions (unemployment) and expansions affect all of usMonetary Theory ties changes in the money supply to changes in aggregate economic activity and the price level第10页，共42页。FIGURE 3 Money Growth (M2 Annu

8、al Rate) and the Business Cycle in the United States, 19502008Note: Shaded areas represent recessions.Source: Federal Reserve Bulletin, p. A4, Table 1.10; /releases/h6/hist/h6hist1.txt.第11页，共42页。FIGURE 4 Aggregate Price Level and the Money Supply in the United States, 19502008Sources: /fred/data/gdp

9、/gdpdef; /releases/h6/hist/h6hist10.txt.第12页，共42页。Money and InflationThe aggregate price level is the average price of goods and services in an economyA continual rise in the price level (inflation) affects all economic playersData shows a connection between the money supply and the price level第13页，

10、共42页。FIGURE 5 Average Inflation Rate Versus Average Rate of Money Growth for Selected Countries, 19972007Source: International Financial Statistics.第14页，共42页。FIGURE 6 Money Growth (M2 Annual Rate) and Interest Rates (Long-Term U.S. Treasury Bonds), 19502008Sources: Federal Reserve Bulletin, p. A4, T

11、able 1.10; /releases/h6/hist/h6hist1.txt.第15页，共42页。Money and Interest RatesInterest rates are the price of moneyPrior to 1980, the rate of money growth and the interest rate on long-term Treasury bonds were closely tiedSince then, the relationship is less clear but the rate of money growth is still

12、an important determinant of interest rates第16页，共42页。FIGURE 7 Government Budget Surplus or Deficit as a Percentage of Gross Domestic Product, 19502008Source: /usbudget/fy06/sheets/hist01z2.xls.第17页，共42页。Monetary and Fiscal PolicyMonetary policy is the management of the money supply and interest rates

13、Conducted in the U.S. by the Federal Reserve System (Fed)Fiscal policy deals with government spending and taxationBudget deficit is the excess of expenditures over revenues for a particular yearBudget surplus is the excess of revenues over expenditures for a particular yearAny deficit must be financ

14、ed by borrowing第18页，共42页。FIGURE 8 Exchange Rate of the U.S. Dollar, 19702008Source: Federal Reserve: /releases/H10/summary/indexbc_m.txt/.第19页，共42页。The Foreign Exchange MarketThe foreign exchange market is where funds are converted from one currency into anotherThe foreign exchange rate is the price

15、 of one currency in terms of another currencyThe foreign exchange market determines the foreign exchange rate第20页，共42页。International FinanceFinancial markets have become increasingly integrated throughout the world. The international financial system has tremendous impact on domestic economies:How a

16、 countrys choice of exchange rate policy affect its monetary policy?How capital controls impact domestic financial systems and therefore the performance of the economy?Which should be the role of international financial institutions like the IMF?第21页，共42页。How We Will Study Money, Banking, and Financ

17、ial MarketsA simplified approach to the demand for assetsThe concept of equilibriumBasic supply and demand to explain behavior in financial marketsThe search for profitsAn approach to financial structure based on transaction costs and asymmetric informationAggregate supply and demand analysis第22页，共4

18、2页。FIGURE 9 Federal Reserve Board Website第23页，共42页。FIGURE 10 Excel Spreadsheet with Interest-Rate Data第24页，共42页。FIGURE 11 Excel Graph of Interest-Rate Data第25页，共42页。Chapter 2An Overview of the Financial System金融体系概览第26页，共42页。Function of Financial MarketsPerform the essential function of channeling f

19、unds from economic players that have saved surplus funds to those that have a shortage of fundsDirect finance: borrowers borrow funds directly from lenders in financial markets by selling them securities. 第27页，共42页。Function of Financial MarketsPromotes economic efficiency by producing an efficient a

20、llocation of capital, which increases production Directly improve the well-being of consumers by allowing them to time purchases better第28页，共42页。FIGURE 1 Flows of Funds Through the Financial System第29页，共42页。Structure of Financial MarketsDebt and Equity MarketsDebt instruments (maturity)Equities (div

21、idends)Primary and Secondary MarketsInvestment Banks underwrite securities in primary marketsBrokers and dealers work in secondary markets第30页，共42页。Structure of Financial MarketsExchanges and Over-the-Counter (OTC) MarketsExchanges: NYSE, Chicago Board of TradeOTC Markets: Foreign exchange, Federal

22、funds.Money and Capital MarketsMoney markets deal in short-term debt instrumentsCapital markets deal in longer-term debt and equity instruments. 第31页，共42页。Table 1 Principal Money Market Instruments第32页，共42页。Table 2 Principal Capital Market Instruments第33页，共42页。Internationalization of Financial Marke

23、ts (Glossary)Foreign Bonds: sold in a foreign country and denominated in that countrys currencyEurobond: bond denominated in a currency other than that of the country in which it is soldEurocurrencies: foreign currencies deposited in banks outside the home countryEurodollars: U.S. dollars deposited

24、in foreign banks outside the U.S. or in foreign branches of U.S. banksWorld Stock MarketsHelp finance federal government also第34页，共42页。Function of Financial Intermediaries: Indirect FinanceLower transaction costs (time and money spent in carrying out financial transactions). Economies of scaleLiquid

25、ity servicesReduce the exposure of investors to riskRisk Sharing (Asset Transformation)Diversification第35页，共42页。Function of Financial Intermediaries: Indirect FinanceDeal with asymmetric information problems(before the transaction) Adverse Selection: try to avoid selecting the risky borrower.Gather

26、information about potential borrower.(after the transaction) Moral Hazard: ensure borrower will not engage in activities that will prevent him/her to repay the loan. Sign a contract with restrictive covenants. 第36页，共42页。Function of Financial Intermediaries: Indirect FinanceConclusion:Financial intermed