Course Contents

1- Introduction and Development of Monetary Mechanism Evolution of Money and payment system, definition of money, function of money & measurement of Money, Demand for Money & Supply of Money, Definitions of Money, M1, M2, M3. 2- Monetary Base and Process of Money supply: Economics and Mathematics of Deposit Creation. Multiple expansion and contraction of bank deposits. The Monetary Base and Multiplier Framework. Factors Producing changers in monetary base. Derivation, Application and Determinants of Money Multiples. 3- Demand for Money:- Quantity Theory of Money, Transaction Theories of Demand for Money. Portfolio Theories of Demand for Money. Baumel-Tobin Model of Cash Management. Friedman’s Restatement of Quantity Theory of Money. Empirical Evidence on the Demand for Money. 4- Behavior of Interest Rates Determination of Interest Rates. Money Demand and Money Supply Interaction. Loan-able Funds Framework. Supply & Demand in Bonds Market. Changes in Interest Rates. 5- Targets and Instruments of Monetary Policy Ultimate Targets of Monetary Policy. Intermediate Targets of Monetary Policy. Selection of Intermediate Targets. Alternative Instruments of Monetary Policy and their Economic Implications. Open Market Operations Discount Window Policy. Reserve Requirement Policy. Rules Vs Discretion. 6- Different Points of Views on Role of Monetary Policy: Transmission Mechanisms and Policy Views in Classical Keynesian and Monetarists’ Model, Wealth Effects.

Course Synopsis

1- Provide the students a good understanding of principles of monetary economics. 2- Explain its relevance & importance to the students in real world.

Course Learning Outcomes

After completing the course the student shall be able to:- 1- Describe the development of monetary mechanism, functions of money, & the role of banking system in the creation of money. 2- Explain the relationship between the money supply growth & inflation. Understand and interpret the main objective and tools of monetary policy & the rational for the various polices used to achieve these objectives & also to maintain economic stability