The Economics of Money, Banking and
Financial Markets 整理笔记Part 1 Introduction
Classification of financial markets
The bond market (where the interest rates are determined)
The stock market (where volatile stock prices are concerned)
The Foreign exchange market (where the Foreign exchange rate is determined)
The bond market:
A bond is a security that is a claim on the issuer’s future income.
The issuer (seller) of a bond: governments or other financial institutions.
The buyer of a bond: investors
The issuer has the obligation to make payments to the buyer within a specified period of time. A bond means a promise made by the issuer to make payments.
The bond market enables corporations and governments to borrow money from investors to finance their activities.
The cost of borrowing: an interest rate
Many types of interest rate: mortgage interest rates, car loan rates and many different types of bonds.
Effects of interest rates: (three aspects)
On consumers:willingness to spend or save. Higher interest rates (meaning high cost of borrowing) would encourage them to save money rather than to spend.
On corporations: business es’investment decisions, such as whether to finance to build a new plant. High interest rates would cause a corporation to postpone such a decision.
On the overall economy: (see Chapter 2)
Because different interest rates have a tendency to move in unison (各种债券的利率趋势相近,具体见电子版教材Pg45 Fig1),economists would like to give them a joint name called the interest rate (方便起见,经济学家统称这些债券的利率为利率).Actually, these interest rates do often differ substantially and the spreads between them fluctuate.(实际上,每种债券的利率走势是不同的).
The stock market:
A stock is a security that is a claim on the earnings and assets of the corporation.
Effects of the stock market:
The stock market affects individuals. Those fluctuations in stock prices, measured by the Dow Jones Industrial Average, affect the size of people’s wealth and therefore affect their willingness to spend.
It also affects business investment decisions. Higher stock prices mean that a corporation can raise a larger amount of funds which can be used to buy production facilities and equipment. Moreover, it plays an important role in the financial system. (see Chapter 2)
The Foreign exchange market:
The role of the exchange market is to channel funds between countries.
●Why study financial markets? (The role of financial markets)
Macro level: Effects on the overall economy: promote greater economic efficiency and produce high economic growth. (economic well-being of countries 社会经济福利)
Micro level: Direct effects on personal wealth, the behavior of businesses (business profits) and consumers
●Why study financial institutions and banking?
Because banks and other financial institutions make financial markets work. Without them, financial markets would not be able to move funds from people who save (存钱的人) to people who have productive investments opportunities (有投资建设工程等需求的人). Thus they play a crucial role (i.e. channeling funds) in the economy.
The financial system can be more efficient by financial innovation. However, it can have a dark side. For example, it may lead to
devastating financial crises. Thus, it shows us how creative thinking on the part of financial institutions can lead to higher profits but can
米什金货币金融学第十版摘要笔记(导言部分)
