The economics of money, banking, and financial markets PDF
Preview The economics of money, banking, and financial markets
The economics of money, Banking, and financial m arkeTs A01_MISH4182_11_GE_FM.indd 1 10/06/15 11:46 am The Pearson Series in Economics Abel/Bernanke/Croushore Greene The Economics of Money, Banking, and Macroeconomics* Econometric Analysis Financial Markets, Business School Edition* Acemoglu/Laibson/List Gregory Macroeconomics: Policy and Practice* Economics* Essentials of Economics Murray Bade/Parkin Gregory/Stuart Econometrics: A Modern Introduction Foundations of Economics* Russian and Soviet Economic Performance O’Sullivan/Sheffrin/Perez Berck/Helfand and Structure Economics: Principles, Applications and Tools* The Economics of the Environment Hartwick/Olewiler Parkin Bierman/Fernandez The Economics of Natural Resource Use Economics* Game Theory with Economic Applications Heilbroner/Milberg Perloff Blanchard The Making of the Economic Society Microeconomics* Macroeconomics* Heyne/Boettke/Prychitko Microeconomics: Theory and Applications The Economic Way of Thinking with Calculus* Blau/Ferber/Winkler The Economics of Women, Men, and Work Holt Perloff/Brander Markets, Games, and Strategic Behavior Managerial Economics and Strategy* Boardman/Greenberg/Vining/Weimer Cost-Benefit Analysis Hubbard/O’Brien Phelps Economics* Health Economics Boyer Money, Banking, and the Financial System* Principles of Transportation Economics Pindyck/Rubinfeld Hubbard/O’Brien/Rafferty Microeconomics* Branson Macroeconomics* Macroeconomic Theory and Policy Riddell/Shackelford/Stamos/Schneider Hughes/Cain Economics: A Tool for Critically Understanding Bruce American Economic History Society Public Finance and the American Economy Husted/Melvin Roberts Carlton/Perloff International Economics The Choice: A Fable of Free Trade and Modern Industrial Organization Protection Jehle/Reny Case/Fair/Oster Advanced Microeconomic Theory Roland Principles of Economics* Development Economics Johnson-Lans Chapman A Health Economics Primer Scherer Environmental Economics: Theory, Industry Structure, Strategy, and Public Application, and Policy Keat/Young/Erfle Policy Managerial Economics Cooter/Ulen Schiller Law & Economics Klein The Economics of Poverty and Mathematical Methods for Economics Daniels/VanHoose Discrimination International Monetary & Financial Krugman/Obstfeld/Melitz Sherman Economics International Economics: Theory & Policy* Market Regulation Downs Laidler Stock/Watson An Economic Theory of Democracy The Demand for Money Introduction to Econometrics Ehrenberg/Smith Leeds/von Allmen Studenmund Modern Labor Economics The Economics of Sports Using Econometrics: A Practical Guide Farnham Leeds/von Allmen/Schiming Tietenberg/Lewis Economics for Managers Economics* Environmental and Natural Resource Folland/Goodman/Stano Lynn Economics The Economics of Health and Health Care Economic Development: Theory and Environmental Economics and Policy Practice for a Divided World Fort Todaro/Smith Sports Economics Miller Economic Development Economics Today* Froyen Understanding Modern Economics Waldman/Jensen Macroeconomics Industrial Organization: Theory and Miller/Benjamin Practice Fusfeld The Economics of Macro Issues Walters/Walters/Appel/Callahan/ The Age of the Economist Miller/Benjamin/North Centanni/Maex/O’Neill Gerber The Economics of Public Issues Econversations: Today’s Students Discuss International Economics* Today’s Issues Mills/Hamilton González-Rivera Urban Economics Weil Forecasting for Economics and Business Economic Growth Mishkin Gordon The Economics of Money, Banking, and Williamson Macroeconomics* Financial Markets* Macroeconomics *denotes MyEconLab titles Visit www.myeconlab.com to learn more. A01_MISH4182_11_GE_FM.indd 2 10/06/15 11:46 am The economics of money, Banking, and financial markeTs Eleventh Edition Global Edition Frederic S. Mishkin Columbia University Boston Columbus Indianapolis New York San Francisco Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo A01_MISH4182_11_GE_FM.indd 3 10/06/15 11:46 am Vice President, Business Publishing: Donna Senior Manufacturing Controller, Global Editions: Trudy Battista Kimber Acquisitions Editor: Christina Masturzo Operations Specialist: Carol Melville Senior Acquisitions Editor, Global Editions: Vaijyanti Creative Director: Blair Brown Ghose Art Director: Jon Boylan Assistant Project Editor, Global Editions: Vice President, Director of Digital Strategy and Paromita Banerjee Assessment: Paul Gentile Editorial Assistant: Christine Mallon Manager of Learning Applications: Paul DeLuca Editorial Assistant, Global Editions: Alice Dazeley Digital Editor: Denise Clinton Vice President, Product Marketing: Maggie Moylan Director, Digital Studio: Sacha Laustsen Director of Marketing, Digital Services and Products: Digital Studio Manager: Diane Lombardo Jeanette Koskinas Digital Studio Project Manager: Melissa Honig Senior Product Marketing Manager: Alison Haskins Digital Content Team Lead: Noel Lotz Senior Strategic Marketing Manager: Erin Gardner Digital Content Project Lead: Courtney Kamauf Team Lead, Program Management: Ashley Santora Media Production Manager, Global Editions: Vikram Kumar Program Manager: Carolyn Philips Full-Service Project Management, Composition, and Team Lead, Project Management: Jeff Holcomb Interior Design: Cenveo® Publisher Services Project Manager: Alison Kalil Cover Designer: Jonathan Boylan Supplements Project Manager: Andra Skaalrud Cover Art: © Ase/Shutterstock PEARSON, ALWAYS LEARNING, and MYECONLAB® are exclusive trademarks, in the United States and/or other countries, of Pearson Education, Inc., or its affiliates. Acknowledgments of third-party content appear on the appropriate page within the text, which constitutes an extension of this copyright page. Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsonglobaleditions.com © Pearson Education Limited 2016 The rights of Frederic S. Mishkin to be identified as the author of this work have been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. Authorized adaptation from the United States edition, entitled The Economics of Money, Banking, and Financial Markets, 11th Edition, ISBN 978-0-13-383679-0 by Frederic S. Mishkin, published by Pearson Education © 2016. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a license permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN 10: 1-29-209418-4 ISBN 13: 978-1-292-09418-2 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10 9 8 7 6 5 4 3 2 1 Typeset in 10.5, Berkley Std by Cenveo® Publisher Services Printed and bound by Courier Kendallville in The United States of America A01_MISH4182_11_GE_FM.indd 4 10/06/15 11:46 am To Sally A01_MISH4182_11_GE_FM.indd 5 10/06/15 11:46 am This page intentionally left blank A01_MISH4182_11_GE_FM.indd 6 10/06/15 11:46 am Brief Contents ParT 1 Introduction 47 1 Why Study Money, Banking, and Financial Markets? ........................................................ 48 2 An Overview of the Financial System ..................................................................................... 68 3 What Is Money? ............................................................................................................................. 95 ParT 2 Financial Markets 109 4 The Meaning of Interest Rates ................................................................................................ 110 5 The Behavior of Interest Rates ................................................................................................ 131 6 The Risk and Term Structure of Interest Rates ................................................................... 162 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis ...................................................................................................................... 186 ParT 3 Financial Institutions 207 8 An Economic Analysis of Financial Structure ...................................................................... 208 9 Banking and the Management of Financial Institutions ................................................... 232 10 Economic Analysis of Financial Regulation .......................................................................... 261 11 Banking Industry: Structure and Competition ................................................................... 280 12 Financial Crises in Advanced Economies.............................................................................. 313 13 Financial Crises in Emerging Economies ............................................................................... 338 ParT 4 Central Banking and the Conduct of Monetary Policy 359 14 Central Banks: A Global Perspective ..................................................................................... 360 15 The Money Supply Process ...................................................................................................... 386 16 Tools of Monetary Policy .......................................................................................................... 411 17 The Conduct of Monetary Policy: Strategy and Tactics .................................................. 436 ParT 5 International Finance and Monetary Policy 469 18 The Foreign Exchange Market ................................................................................................. 470 19 The International Financial System ........................................................................................ 497 ParT 6 Monetary Theory 525 20 Quantity Theory, Inflation, and the Demand for Money ............................................... 526 21 The IS Curve ...................................................................................................................................544 22 The Monetary Policy and Aggregate Demand Curves ................................................... 564 23 Aggregate Demand and Supply Analysis ............................................................................ 579 24 Monetary Policy Theory ........................................................................................................... 623 25 The Role of Expectations in Monetary Policy ..................................................................... 652 26 Transmission Mechanisms of Monetary Policy ................................................................... 672 77 A01_MISH4182_11_GE_FM.indd 7 10/06/15 11:46 am 8 Brief Contents Chapters on the Web 1 The ISLM Model 2 Nonbank Finance 3 Financial Derivatives 4 Conflicts of Interest in the Financial Services Industry A01_MISH4182_11_GE_FM.indd 8 10/06/15 11:46 am Contents in Detail ParT 1 Introduction 47 chaPTer 1 Why Study Money, Banking, and Financial Markets? 48 Why Study Financial Markets? ............................................................................................................48 The Bond Market and Interest Rates .....................................................................................49 The Stock Market .................................................................................................................49 Why Study Financial Institutions and Banking? .............................................................................51 Structure of the Financial System .........................................................................................52 Banks and Other Financial Institutions .................................................................................52 Financial Innovation ............................................................................................................52 Financial Crises ....................................................................................................................53 Why Study Money and Monetary Policy? ......................................................................................53 Money and Business Cycles ..................................................................................................53 Money and Inflation .............................................................................................................54 Money and Interest Rates .....................................................................................................56 Conduct of Monetary Policy .................................................................................................56 Fiscal Policy and Monetary Policy ........................................................................................57 Why Study International Finance? .....................................................................................................58 The Foreign Exchange Market ..............................................................................................58 The International Financial System ......................................................................................60 How We Will Study Money, Banking, and Financial Markets ....................................................60 Exploring the Web ...............................................................................................................61 Concluding Remarks...............................................................................................................................61 Summary 61 • Key Terms 62 • Questions 62 • Applied Problems 63 • Data Analysis Problems 63 • Web Exercises 64 • Web References 64 aPPendiX To chaPTer 1 Defining Aggregate Output, Income, the Price Level, and the Inflation Rate 65 Aggregate Output and Income ..........................................................................................................65 Real Versus Nominal Magnitudes .......................................................................................................65 Aggregate Price Level ............................................................................................................................66 Growth Rates and the Inflation Rate .................................................................................................67 chaPTer 2 An Overview of the Financial System 68 Function of Financial Markets ..............................................................................................................68 Structure of Financial Markets .............................................................................................................71 Debt and Equity Markets ......................................................................................................71 Primary and Secondary Markets ...........................................................................................71 Exchanges and Over-the-Counter Markets ...........................................................................72 Money and Capital Markets ..................................................................................................73 99 A01_MISH4182_11_GE_FM.indd 9 10/06/15 11:46 am
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