This course is about money, central banks, and financial institutions. We focus on how they affect businesses, how they help companies grow, and what can go wrong.
One focus of the course is on large financial crises. We highlight why a well-functioning monetary and financial system is key to a successful economy. We analyze how central banks use conventional and unconventional monetary policy in crises, using examples from the 2008 financial crisis and the recent inflationary period. We also consider how households and firms react to monetary policy.
A second focus of the course is how companies finance themselves and why they choose banks. Key questions are why banks exist and whether banks have a special role in the economy. We cover fundamental economic concepts, including asymmetric information on credit markets and banks’ instability due to liquidity transformation. To evaluate whether and how such concepts actually matter in the real world, we read and discuss modern empirical research.
A third focus of the course is how central banks regulate the financial sector. We discuss topical questions, such as whether we should stop banks from becoming “too big to fail” and whether banks should receive government bailouts. The regulatory concepts that we discuss affect not only financial institutions, but also businesses and their customers.