ISI Website| indepst@uidaho.edu | 208-885-6641

ECON 3430 Money and Banking

Sponsoring Institution: University of Idaho 

3 Credits

Instructor Information

Course Instructor: Steve Peterson

• Email: stevenp@uidaho.edu
• Phone: (208) 301-4148
• Office Hours: By appointment
• Copy the ISI office at indepst@uidaho.edu on all communications.

I am a Research Economist at the University of Idaho and a Clinical Assistant Professor in Economics in the Department of Business at the University of Idaho, where I have been employed for 20 years. My teaching interests are introductory macroeconomics, microeconomics, money and banking, and intermediate macroeconomics.  My research interests are regional economic development and impact analysis. I have conducted studies on the economic impacts to local Idaho communities from reductions of timber harvests on federal forests, the economic impact of colleges and universities, the economic impacts of inland ports and dam removal to save salmon, tribal gaming, and other interesting subjects. I look forward to assisting you in your exploration of economics.

Course Description

Influence of money and banking on economic activity; influence of monetary policies to achieve society's economic goals.
Prereq: Econ 201 and Econ 202 or Econ 272.

Welcome to the world of economics. This course examines an important branch of economics called Money and Banking, which includes the study of financial institutions, the financial markets, the role of money in the economy, and the impact of monetary policy. The focus of this branch of economics is on the role that money plays in the lives of individual decision makers, on government policy, and on the economy as a whole.

The banking industry in the United States has undergone massive changes since the 1970s. Not since the Great Depression have so many institutional reforms been enacted. The Depository Institutions Deregulation and Monetary Control Act of 1980 began a process of deregulation of banking, arguably the most heavily regulated industry in the United States. Deregulation provided a series of challenges to the banking industry that shook it to its core. The first challenge was the savings and loan crisis (1980– 1992), which led to the near collapse of the entire savings and loan industry and cost the taxpayers about $150 billion. Other 1980s crises included the 1980–1982 recession; the Third World debt crisis (where financial institutions of the industrialized world loaned many poor nations nearly a trillion dollars, for which many nearly defaulted); the 1987 stock market crash; the sharp rise of the U.S. national debt; and the melt-down of the junk bond market in the late 1980s.

The savings and loan crisis led to the passage of two important pieces of legislation: Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), and the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). These bills provided the money and the legislative muscle to end the savings and loan crisis and enacted many important new restrictions and regulations on financial institutions.

The 1990s continued the revolution in banking that began in the 1980s. The rise of new technologies and new financial innovations like derivatives, the process of globalization, and the rise of the Internet have further challenged banking authorities and changed the landscape of banking. The industry is rapidly consolidating, changing from numerous unit banks to branch banking, largely from the passage of the Riegle-Neal Interstate and Branching Efficiency Act of 1994.

The differences between financial institutions such as commercial banks, credit unions, and savings banks, are rapidly disappearing; you may not be able to tell the difference between them in twenty years. Many new financial services such as online banking, interstate banking and branching, ATMs, derivatives, and many others, unheard of twenty years ago, now exist. The 1990s was a period of transition for the banking industry that was both exciting and scary. The “wall” between investment and commercial banking came down in 1999 with the passage of the Gramm-Leach-Bliley Financial Services Modernization Act of 1999. This may lead to “one-stop” shopping for financial services in the future.

The new century began with the challenges posed by the collapse of the “Dot-Com” boom and the recession of 2001. The terrorist attack on 9/11/01 continues to pose challenges to the U.S. and the global community. The Enron scandal and other accounting related investor fraud led to the passage of the Sarbanes-Oxley Act (Public Company Accounting Reform and Investor Protection Act) of 2002. The future of banking and financial services looks bright. Federal banking regulators have managed the various crises aggressively and efficiently (although not without controversy). The nexus of changes in technology, changes in institutions and laws, and globalization are fundamentally changing banking. We may even have “brickless” banks, conducting banking via the Internet from home. These firms would be entirely “online” much like Amazon.com, only offering financial services and banking.

Course Learning outcomes

The objectives of this course are to:

1. Introduce the student to economic thinking and analysis
2. Acquaint the student with economic and financial concepts, terminology, and logic
3. Familiarize the student with the tools needed for examining important economic variables such as real output, inflation, unemployment, and interest rates
4. Introduce to the student the basics of the U.S. financial system, types of financial institutions, methods of financial intermediation, the evolution of the structure of the U.S. financial system, U.S. central bank, money creation and money types
5. Facilitate critical thinking by exploring the analytical tools derived from economic theory and its applications
6. Introduce to the student the various policy tools available to decision-makers for influencing the money supply, interest rates, availability of credit, productivity growth, inflation, and unemployment
7. Introduce to the student the basic workings of the macro-economy through the exploration of basic macro models
8. Explore some of the basic macroeconomic disagreements among economists and the policy implications from those disagreements
9. Familiarize the student with the growing global economy and how the economic future of the nations of the world are intertwined
10. Illustrate the importance and relevance of the financial markets, the U.S. monetary system, the global economy, and economics in general to the student’s life and future career.

Required Materials

Mishkin, Frederic S. The Economics of Money, Banking, and Financial Markets. 8th ed. Boston: Addison Wesley, 2007. ISBN: 0-321-28726-6

ECON 343: Money and Banking course guide. (Available in Canvas)

Federal Reserve articles. (Available in Canvas)

Course Rules and Requirements

Assignment Guidelines

• 14 graded lessons, 1 optional assignment, 4 self-study practice exams, 4 exams
• Students may submit up to 5 assignments per week. The instructor may take up to two weeks to grade submitted assignments after they are submitted.
• Assignments and exams must be submitted consecutively, in the order outlined in the course.
• Keep a copy of each lesson!
• Complete the entire lesson assignment (partial or incomplete assignments will have the appropriate points deducted.)
• All assignments and exams must be submitted to receive a final grade for the course.

Exam Guidelines

• There are four graded exams that are structured much like the practice exams.
• You must wait for grades and comments on lessons prior to taking each subsequent exam.
• Practice exams are provided at the end of each block of material to help you prepare for the exam that will be graded.
• Practice exams will not be graded, and should NOT be submitted
  to your instructor.

Grade Information

The course grade will be based upon the following:

Lessons 1-13 (21 pts each) = 273 pts

Lesson 14 (27 pts) = 27 pts

4 Exams (175 pts each) = 700 pts

1000 total points possible

The following scale applies in determining your final grade.

Grading Scale

Points	Percent	Grade
900-1000	90-100%	A
800-899	80-89%	B
700-799	70-79%	C
600-699	60-69%	D
Below 599	Below 60%	F

Your instructor retains the option of applying a grading curve to lower the minimums listed above, in order to make the Independent Study in Idaho grades compatible with those of courses taught on campus. Since the minimums can be lowered but not raised, this will work to your advantage. A hypothetical example would be to lower the minimum of an “A” grade from 90 percent to 88 percent. If you have any questions on grading, contact your instructor.

The final course grade is issued after all assignments and exams have been graded.

Optional Extra Credit Paper

An extra credit paper may add a maximum of 40 points to your course total. Therefore, a good paper will add 25 or more points to your course total, an average paper 25 points or so, and a below average paper fewer than 15 points.

The extra credit paper option is not for everyone. It requires an investment in time and research effort. Nonetheless, it offers potential rewards in terms of grade and knowledge enhancement. Furthermore, it allows Independent Study in Idaho students the same option as offered to on-campus students.

The topic is Financial Innovation: Past, Present, and Future. This is a broad topic. You can write the paper on new financial instruments, new technologies, or specific pieces of legislation. You should narrow the topic to some aspect of financial innovation that has occurred in the past, is occurring in the present, or will occur in the future.

The paper should be a minimum of eight pages in length, word-processed, double-spaced, with citations and bibliography in either APA or MLA format. You may choose which format you would like to use— but be consistent. Contact your instructor if you have any questions.

Course Policies

Refer to the ISI Policies for the most current policies and procedures, including information on setting up accounts, student confidentiality, exams, transcripts, course exchanges, refunds, academic integrity, library resources, disability support and other services.