DEPAUL UNIVERSITY
DEPARTMENT OF ECONOMICS

This course focuses on the economics of financial markets and monetary policy. As with the economic analysis of any market, we will be concerned with understanding the movement of prices (financial asset prices – e.g., bond prices, interest rates and exchange rates) in these markets. Since financial assets entail future expected returns, we will also emphasize the measurement and management of risk associated with financial assets. The structure and motivations of players at financial institutions will also help to explain the movements and relevance of asset prices and risk. Therefore, this course will delve into the structure and behavior of key financial institutions, such as commercial banks; stock, bond, commercial paper, currency and derivative markets, and the Federal Reserve Bank. We will discuss the connection between financial and real markets (i.e. the markets for real output and labor) to show how financial market shocks can affect the real economy. Because the instability in financial markets can sometimes spillover into the real economy, we will discuss the need for government intervention and the appropriate emphasis of that intervention.
When you finish this course, you should have a good working knowledge of,

• the purpose and function of financial markets
• the determinants of interest rate and exchange rate movements
• how to measure and assess risk associated with financial assets
• how to shift and spread risk
• the role of the market in stabilizing and destabilizing the financial sector
• the role of government intervention in stabilizing financial markets and promoting efficiency

Syllabus

Assignments
Readings