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Course Name (English)
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MONETARY THEORY AND POLICY
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| Course Code |
ECO531 |
| Course Description |
This course covers the nature, functions, roles and importance of money, financial markets and financial intermediaries in
the economy. It also studies the interest rates, money supply, money demand, and ISLM model. |
| Transferable Skills |
Reflective Learner Independent & critical thinker
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| Teaching Methodologies |
Lectures, Discussion, Presentation |
| CLO |
| CLO1 |
Discuss theories and concepts in monetary theory and policy. |
| CLO2 |
Analyze monetary theories and concepts in relation to economic issues, problems and government policies. |
| CLO3 |
Demonstrate managerial skills in relation to monetary economic issues. |
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| Pre-Requisite Courses |
No course recommendations |
| Topics |
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1. Introduction: Overview of the study on money, banking and financial markets
1.1) Why study money, banking and financial markets?
1.2) To examine the role of money in the economy.
1.3) To examine the link between money and business cycles, money and inflation, money and interest rates.
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2. An Overview of the Financial System
2.1) Functions of Financial markets and Financial Intermediaries
2.2) Structure of Financial Markets
2.3) Financial Markets Instruments
2.4) Financial Intermediaries
2.5) Structure of Malaysian Financial System
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3. Money and Payment System
3.1) Meaning of Money
3.2) Functions of Money
3.3) Evolution of the Payment System
3.4) Measuring Money
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4. The Behavior of Interest Rates
4.1) Interest rates and Returns
4.2) Real and Nominal Interest Rates
4.3) Theories on the Determination of Interest Rates
4.4) (i) Classical Model (bond market)
4.5) (ii) Keynesian Model (money market)
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5. The Risk and Term Structure of Interest Rates
5.1) Risk Structure of Interest Rates
5.2) Term Structure of Interest Rates
5.3) (i) Pure Expectations Theory
5.4) (ii) Segmented Market Theory
5.5) (iii) Liquidity Premium and Preferred Habitats Theories
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6. Monetary Policy
6.1) Monetary Policy Objectives
6.2) Instruments: Advantages and Disadvantages of Monetary Policy Instruments
6.3) The Monetary Policy in stimulating economic growth
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7. The Theory of Money Demand
7.1) Fisher's Quantity Theory of Money
7.2) Cambridge Approach to Money Demand
7.3) Keynesian Liquidity Preference Theory
7.4) Friedman's Modern Quantity Theory of Money
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8. ISLM Model
8.1) General Equilibrium
8.2) Factors Determining
8.3) (i) Slopes of IS and LM
8.4) (ii) Shifts in IS and LM curves
8.5) Relative Effectiveness of Monetary and Fiscal Policies
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| Assessment Breakdown | % |
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| Continuous Assessment | 60.00% |
| Final Assessment | 40.00% |
| Details of Continuous Assessment |
| Assessment Type |
Assessment Description |
% of Total Mark |
CLO |
| Assignment |
Individual Assignment: 1- 4 short quizzes/assignments (MCQ, short essay, long essay, fill in the blanks, T/F, etc. |
20% |
CLO1
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| Assignment |
Group Assignment: Report -15%, Presentation - 5% |
20% |
CLO3
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| Test |
Test 1- Chapter 1, 2, 3 and 4 (Short essay and Long essay) |
10% |
CLO2
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| Test |
Test 2 - Chapter 5, 6, 7 and 8 (Short Essay and Long Essay Questions) |
10% |
CLO2
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| Reading List | | Recommended Text | - Mishkin, Frederic S. 2015, The Economics of Money, Banking and Financial Market, 11th Edition Ed., Pearson Addison-Wesley
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| Article/Paper List | This Course does not have any article/paper resources |
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| Other References | - n/a Miller, R.L. and Van Hoose D. D. 2004, Modern Money and Banking, McGraw Hill/Irwin
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