Degree course: 
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Academic year in which the course will be held: 
Course type: 
Compulsory subjects, characteristic of the class
Second semester
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Lesson (40 hours)

Mod.1 - Banks and Money Market

Mod.2 - Monetary and Credit Economics
Have passed the examinations of Microeconomics and Macroeconomics.

Voto Finale

Mod.1 - Banks and Money Market
The purpose of this course is to offer the tools to understand Central Bank behaviors and the effects of monetary policy on financial markets, on the banking sector and on the macroeconomic variables. The first part of the course deals with monetary policy instruments and the transmission mechanism and analyzes the role of banks in the transmission process. In doing so, the course is constantly referring to the recent evolution of the strategy and the monetary policy decisions enacted by the ECB during the financial crisis in 2007-08 and the following sovereign debt crises. Particular attention is reserved to the impacts of the crisis, in its different phases, and of the consequent ECB interventions on bank balance-sheets and credit conditions, with specific focus on the Italian banking sector. Within this scope, the course deals with the Eurosystem liquidity framework, trends in bank funding, factors affecting the lending activity. As regard the credit channel, the course includes in-depth analysis of credit demand and supply factors, and measures undertaken to improve access to finance especially by SMEs. In order to provide the student with the tools to understand and interpret monetary and credit phenomena, the course is frequently resorting to the empirical analysis of aggregates and interest rates of the money market and the banking sector, based on statistics from the ECB and the Bank of Italy. The last part of the course aims at presenting the current European developments with regards to institutions and regulations meant to achieve the objective of financial stability, and the new framework of the Banking Union.

Mod.2 - Monetary and Credit Economics
The course is devoted to the analysis of the relationship between money and credit and of the macroeconomic role of money and finance. To deal with these issues it will be given great attention to the analysis of the subprime financial crisis which is the immediate cause of the most heavy economic crisis since the Great Depression.

Mod.1 - Banks and Money Market
1. The role of banks in the monetary policy transmission mechanism, with specific regards to:
i. Official interest rates, money market interest rates, bank rates;
ii. Credit channel;
iii. Monetary aggregates;
iv. External shocks (risk premia, market disruptions, bank capital, changes in the real economy, ….)
2. Monetary policy instruments, both conventional and unconventional, and bank refinancing:
i. Conventional operations (open market operations, standing facilities, minimum reserves);
ii. Collateral, with specific regards to changes in eligible assets, to eligibility criteria, and haircuts;
iii. Non-standard monetary policy measures and their effects on financial markets.
3. The interconnection between sovereign risk and banking risk: main determinants and effects on the availability and cost of bank liquidity and long-term funding.
4. The money market during the crisis: disruption of the monetary policy transmission and financial fragmentations in the euro area.
5. Recent trend in bank liquidity and funding: recourse to the Eurosystem refinancing operations; secured and unsecured funding.
6. Credit demand and supply:
v. Main demand determinants and supply factors, and impact of supply side constraints on credit tightening / easing;
vi. The credit crunch debate;
vii. SME financing and measures to improve credit access conditions;
viii. Financing sources other than bank credit.
7. The ECB and the objective of financial stability: institutions and instruments; interactions with the evolving framework of bank prudential regulation.
8. The European Banking Union, based on three pillars: (i) the Single Supervisory Mechanism (SSM); (ii) the Single Resolution Mechanism (SRM); and (iii) a common system of deposit protection.

Mode of Delivery:
The lessons are comprehensive of slides available for students. The training is completed with the active participation of students in classroom exercises, presentations and discussions of research papers dealing with monetary and banking topics included in the course program.

Mod.2 - Monetary and Credit Economics
1.A schematic description of the crisis.
a) The financial crisis: development and collapse of the subprime mortgage market.
b) From the financial crisis to the Great Recession: the three phases of the crisis.

2.The explanation of the origin of the crisis
a) the financial crisis and the Federal Reserve monetary policy (Taylor)
b) The crisis and the financial system: Finance has created an excessive amount of risk(Rajan)
c) The global saving glut and the crisis (Bernanke)

3. The crisis and the economic theory: the neoclassical theory of finance and the exogenous nature of the crisis.
a) The role of finance in accordance with the neoclassical theory.
b) The neoclassical theory of money and credit.
c) Financial intermediaries and information asymmetries.
d) Finance and growth.

4. The crisis and the economic theory: the Keynes-Schumpeter’s theory of finance and the endogenous nature of the crisis.
a) Hicks and the three stages of the evolution of the banking system
b) Keynes and Schumpeter: the relationship between bank money, investment decisions and uncertainty
c) Bank money and economic development: the Schumpeter’s analysis.
d) Saving decisions, wealth and speculation: the Keynes’s analysis
e) The endogenous nature of the subprime crisis: the analysis of Keynes and Minsky.

Mode of Delivery: lectures

Mod.1 - Banks and Money Market
Textbooks and readings are communicated at the beginning of the course. Lecture slides are made available.

Final written exam. Questions aim at assessing the level of knowledge and the abilities to judge, analyze and comment the monetary and credit topics dealt with based on the course program. The final score takes into account exercises and presentations made by students, according to criteria communicated during the course.

Mod.2 - Monetary and Credit Economics
-Bernanke, B. 2005. The global saving glut and the U.S. current account deficit, Sandridge Lecture, March 10, 2005.
-Bernanke, B. 2007. Global imbalances: recent developments and prospects, Bundesbank lecture, September 11, 2007.
-G.Bertocco: The role of credit in a keynesian monetary economy, Review of Political Economy, 17, 4, pp. 489-511, 2005.
-G.Bertocco: The characteristics of a monetary economy: a Keynes-Schumpeter approach, Cambridge Journal of Economics, 31, 1, pp.101-122, 2007.
-G.Bertocco: Finance and development: is Schumpeter’s analysis still relevant?, Journal of Banking and Finance,32, pp. 1161-1175, 2008.
-J. Hicks: Una teoria della storia economica, Utet 1971, pp. 108-111.
J.M.Keynes: A monetary theory of production, 1933. C.W. vol. XIII, pp.408-411.
J.M.Keynes: The distinction between a co-operative economy and an entrepreneur economy, 1933, C.W. vol. XXIX, pp. 76-87.
-J.M.Keynes: La Teoria generale del reddito, dell’occupazione e della moneta, 1936, cap. 12, Lo stato dell’aspettativa a lungo termine.
J.M.Keynes: La teoria generale dell’occupazione, dell’interesse e della moneta, 1936, cap. 13, La teoria generale del tasso d i interesse.
P.Krugman: Gli errori degli economisti, Internazionale, 18 settembre 2009, pp.30-39.
-B.McCallum: Monetary Economics, Macmillan, 1989, pp. 25-30.
Minsky H., 1975. John Maynard Keynes, Columbia University Press.
Minsky, H., 1980. Money, financial markets and the coherence of a market economy, Journal of Post Keynesian Economics, vol. 3, 21-31
Minsky H., 1982. Can 'It' Happen Again? Essays on Instability and Finance, M.E.Sharpe, New York.
-M. Pagano: Financial markets and growth, European Economic Review, 37, pp. 613-622, 1993.
S.Rossi: Miseria e nobiltà della finanza, Il Mulino, 6, dicembre 2008, pp.1055-1065.
-Rajan, R., Terremoti finanziari, Eiunaudi, 2012.
-J.Schumpeter: Bank credit and the ‘creation’ of deposits, History of Economic Theory, pp. 1110-1117, 1954.
- -G.Tabellini: Idee e regole per il mondo dopo la tempesta. Il Sole 24 ore 7-5-2009.
-G.Tabellini: Il mondo ritorna a correre L’Italia non si fermi. Il Sole 24 ore 24-6-2009.
-J. B. Taylor: Fuori Strada. Come lo Stato ha causato, prolungato e aggravato la crisi finanziaria. IBL libri, 2009; cap. 1: Cosa ha causato la crisi finanziaria, pp. 25-38.

Assessment: The student will have to take a final written exam


Parent course