ENV 355 Economics of Money and Finance

What are financial markets for? How are they embedded in the circular flow of the national economy? How are real markets, i.e. markets of goods and services, intert wined with the money market and the financial market? How is real economic growth, measured by GDP growth, related to monetary and financial variables? How are connected the money market, bonds market and the Stock Exchange? What is the impact of monetary policy on financial markets? Does the central bank have a significant impact on financial markets and through what channels? Why are there financial intermediaries, i.e. financial institutions, at all? On financial markets, is it possible to "beat the market"? Shall one find out the invisible formula behind the messy and massive data flowing from financial markets? How to sketch simple but realistic work ing hypotheses on how financial markets work? Do economic and financial calculation and optimization models help understand investment decisions? Does rational calculation drive investment decisions or are they driven by "animal spirits" and "' irrational exuberance"? Lectures in this course aim at offering some answers to these theoretical questions from the point of view of economics, both macroeconomics and microeconomics. We use basic quantitative tools to analyze economic and financial mathematical models.