I need 1500 words essa excluding  excluding the title, equations, figures, diagrams, tables, footnotes and references). Instructions are given in word file. Please fol

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 I need 1500 words essa excluding  excluding the title, equations, figures, diagrams, tables, footnotes and references). Instructions are given in word file. Please follow the instructions carefully

FACULTY OF BUSINESS AND LAW

SCHOOL OF ACCOUNTING, ECONOMICS AND FINANCE

International Banking, Financial Markets, and Monetary Policy

International Banking, Financial Markets, and Monetary Policy

Coursework Essay 2022-23

Essay Questions

You are required to write a 1,500-word essay (excluding the title, equations, figures, diagrams, tables, footnotes and references) in response to the following task:

Bitcoin has received a large amount of attention since its introduction in 2008.

Critically discuss

(i) if cryptocurrencies such as Bitcoin are the future of money,
AND

(ii) if cryptocurrencies have impact on UK monetary aggregates.

Your essay should make use of financial or economic theory and data that are relevant to the argument you want to make. You may include graphs, figures and tables that are helpful to illustrate your arguments.

Further instructions for this coursework assignment

This is an individual assignment, and your essay mark will account for

40% of your overall mark
for the module.

This piece of work will address learning outcomes 3 and 5 as set out in the module descriptor.

3. Assess the appropriateness of policies aimed at various economic and financial market problems.

5. Compose and present scholarship to a professional standard.

Word Count

Your essay should be no more than

1,500 words
excluding the title, equations, figures, diagrams, tables, footnotes and references. Students are NOT permitted to exceed the word limit by 10% or any other amount. Coursework that exceeds 1,500 will not be read beyond the stated word count.

Referencing Requirements

Your essays will be inspected for plagiarism. Please use the APA 7th edition referencing style. Referencing is a vital part of your academic studies and research at University of Portsmouth. See

https://library.port.ac.uk/w683.htm


l
for more on why you need to be concerned about plagiarism and referencing. Additional guidance on these important matters can be found at the dedicated library page

https://library.port.ac.uk/ref/page2.html.
 Reference should be made to the primary source, except when the primary source can no longer be obtained. P

International Banking, Financial Markets and Monetary Policy

Lecture 6. Monetary Policy (I)

International Banking, Financial Markets and Monetary Policy

2

Topic 1: Money and Banks

Topic 2: Roles of Banking

•

Topic 3: Monetary Policy

Topic 4: Financial Crises

Topic 5: Financial Technology (FinTech)

Lecture 6 Outline

3

Topic 3:

Monetary Policy

A key measure of the economy’s performance in the short run

The causes of the financial crisis that began in the summer of 2007 and where the economy currently stands

The first building block of our short-run model: the IS curve

Trends and Fluctuations

4

Output is equal to the long-run trend plus short-run fluctuations:

Short-run fluctuation:

Trends and Fluctuations

Economic Fluctuations and Short-Run Output

5

Quiz

6

Potential output is £100 in 2010. Actual output is £110 in 2010.

Actual output in 2009 was £105. Short-run output for 2010 is

(1) £10

(2) £5

10 percent

5 percent

Stylised Facts

7

Stylised Facts

8

Stylised Facts

Inflation in the United States

9

Three Premises

10

The Short-run model is based on three premises:

The economy is constantly being hit by shocks:

shock: Factors that cause fluctuations in output or inflation

Monetary and fiscal policies affect output:

Policy makers may be able to neutralise shocks to the economy

There is a dynamic trade-off between output and inflation: The Phillips curve is the dynamic trade-off between output and inflation

A Graph of the Phillips Curve

11

The Great Recession: A First Look

12

Housing Price Bubble Forms – Between mid-2006 and the first quarter of 2012, the national index for

housing prices plummeted by 36 percent

The Great Recession: A First Look

13

Global Saving Glut – Ben Bernake March 2005: “global saving glut“, Glut = “excess”

The US had an excess of savings with desire to invest

Higher investment demand contributed to rising asset prices in the housing market

The saving glut led to low interest rates, and many borrowers took

out mortgages to buy homes between 2000 and 2006

Many of these borrowers were subprime

Between 2004 and 2006, the Fed raised its interest rate

International Banking, Financial Markets and Monetary Policy

Lecture 5. Roles of Banking (Part II)

International Banking, Financial Markets and Monetary Policy

2

Topic 1: Money and Banks

•

Topic 2: Roles of Banking

Topic 3: Central Bank and Monetary Policy

Topic 4: Financial Crises

Topic 5: Financial Technology (FinTech)

Preliminaries

3

a) Balance Sheet

Balance Sheet (Report of Condition):

lists assets (financial outputs) and liabilities (financial inputs),

Refers to a particular point in time (financial stocks) A stylised Balance Sheet:

Preliminaries

4

b) Income Statement

Income Statement (Profit and Loss Account):

lists revenues and expenses,

Refers to a particular time period (financial flows) A stylised Balance Sheet:

Preliminaries

5

Asset Transformation

Maturity Transformation:

Liabilities of banks tend to be short-term and relatively liquid,

Assets of banks tend to be long-term and relatively illiquid

Exposure to liquidity risk,

Need for appropriate liquidity management

2) Risk Transformation:

Liabilities of banks are (supposed to be) relatively safe,

Assets of banks can be relatively risky.

Exposure to default risk,

Need for appropriate adequacy management

Liquidity Management – Small Liquidity Shocks

6

a) Scenario

Liquidity Management:

A bank needs to acquire sufficiently liquid assets to meet its obligations to depositors.

Assumptions:

Bank must hold a fraction 𝛾 of deposits as reserves,

Bank experiences a small deposit outflow 𝑥 .

Initial Balance Sheet:

Liquidity Management – Small Liquidity Shocks

7

b) Numerical Example

Assumptions:

Bank must hold a fraction 10% of deposits as reserves,

Bank experiences a small deposit outflow £10 .

Initial Balance Sheet:

Resulting T-Account:

Liquidity Management – Small Liquidity Shocks

8

c) The General Case

Resulting T-Account:

Results:

If a bank has ample excess reserves:

𝑅𝑒𝑥𝑐 ≥

1 − 𝛾 𝑥 (1)

a deposit outflow will not force changes in other balance sheet items.

Liquidity Management – Small Liquidity Shocks

9

d) Conclusion

Implications of a Small Liquidity Shock:

If a bank experiences a small liquidity s

International Banking, Financial Markets and Monetary Policy

Lecture 3. Roles of Banking

International Banking, Financial Markets and Monetary Policy

2

Topic 1: Money and Banks

•

Topic 2: Roles of Banking

Topic 3: Central Bank and Monetary Policy

Topic 4: Financial Crises

Topic 5: Financial Technology (FinTech)

Lecture 3 Outline

3

Topic 2:

Roles of Banking

Summarise how transaction costs affect financial intermediaries

Describe why asymmetric information leads to adverse selection and moral hazard

Preliminaries

4

a) Modes of Financing

Bonds versus Stocks:

A bond is a debt security that promises to make payments periodically for a specified period of time.

A (common) stock is an equity security that represents a share of ownership in a corporation. It is a claim on the residual earnings and assets of the corporation.

Direct Finance vs Indirect Finance:

Direct finance via financial markets.

Indirect finance via financial intermediaries.

Preliminaries

5

b) Frictions in Financial Relationships

Transaction Costs:

Time and money spent in carrying out financial transactions.

Asymmetric Information

Adverse Selection (hidden characteristics)

→ Avoid selecting an unwanted transaction partner.

Moral Hazard (hidden action)

→ Ensure that transaction partner will not engage in unwanted activities.

Preliminaries

c) Stylised Facts

Sources of External Funds for Non-financial Businesses

6

Preliminaries

7

Stylised Facts

Basic Facts about Financial Structure:

Direct finance:

Issuing marketable debt and equity securities is not the primary way in which businesses finance their operations.

Stocks are not the most important sources of external financing for businesses.

Only large, well-established corporations have easy access to securities markets to finance their activities.

2) Indirect finance:

Indirect finance is many times more important than direct finance.

Financial intermediaries, particularly banks, are the most important source of external funds used to finance businesses.

3) The financial system is among the most heavily regulated sectors of the economy.

Information Production – Framework

a) Scenario

Agents:

Project Idea of Entrepreneur(s):

I = Initial Investment,

R = Risky Future Return.

Internal Funds of Financier:

Financier has more funds than needed for in

International Banking, Financial Markets and Monetary Policy

Lecture 4. Roles of Banking

International Banking, Financial Markets and Monetary Policy

2

Topic 1: Money and Banks

•

Topic 2: Roles of Banking

Topic 3: Central Bank and Monetary Policy

Topic 4: Financial Crises

Topic 5: Financial Technology (FinTech)

Lecture 4 Outline

3

Topic 2:

Roles of Banking

Summarise how transaction costs affect financial intermediaries

Describe why asymmetric information leads to adverse selection and moral hazard

Preliminaries

4

Modes of Financing

Bonds versus Stocks:

A bond is a debt security that promises to make payments periodically for a specified period of time.

A (common) stock is an equity security that represents a share of ownership in a corporation. It is a claim on the residual earnings and assets of the corporation.

Direct Finance vs Indirect Finance:

Direct finance via financial markets.

Indirect finance via financial intermediaries.

Preliminaries

5

b) Stylised Facts

Sources of External Funds for Non-financial Businesses

Preliminaries

6

Stylised Facts

Basic Facts about Financial Structure:

Direct finance:

Issuing marketable debt and equity securities is not the primary way in which businesses finance their operations.

Stocks are not the most important sources of external financing for businesses.

Only large, well-established corporations have easy access to securities markets to finance their activities.

2) Indirect finance:

Indirect finance is many times more important than direct finance.

Financial intermediaries, particularly banks, are the most important source of external funds used to finance businesses.

3) The financial system is among the most heavily regulated sectors of the economy.

Preliminaries

7

Frictions in Financial Relationships

Transaction Costs:

Time and money spent in carrying out financial transactions.

Asymmetric Information

Adverse Selection (hidden characteristics)

→ Avoid selecting an unwanted transaction partner.

Moral Hazard (hidden action)

→ Ensure that transaction partner will not engage in unwanted activities.

Information Production – Framework

8

a) Scenario

Agents:

Project Idea of Entrepreneur(s):

I = Initial Investment,

R = Risky Future Return.

Internal Funds of Financier:

Financier has more funds than

International Banking, Financial Markets and Monetary Policy

Lecture 1. Money and Banks (1)

International Banking, Financial Markets and Monetary Policy

2

•

Topic 1: Money and Banks

Topic 2: Roles of Banking

Topic 3: Central Bank and Monetary Policy

Topic 4: Financial Crises

Topic 5: Financial Technology (FinTech)

Lecture 1 Outline

3

Topic 1: Money and Banks (1)

Describe what money is

List and summarise the functions of money

Identify different types of payment systems

Compare and contrast the M1 and M2 money supplies

Understand the quantity theory of money and interest rates

Meaning of Money

4

Money (or the “money supply”): anything that is generally accepted as payment for goods or services or in the repayment of debts.

A rather broad definition

Money (a stock concept) is different from:

Wealth: the total collection of pieces of property that serve to store value

Income: flow of earnings per unit of time (a flow concept)

Functions of Money

5

Medium of Exchange:

Eliminates the trouble of finding a double coincidence of needs (reduces transaction costs)

Promotes specialisation

A medium of exchange must:

be easily standardized

be widely accepted

be divisible

be easy to carry

not deteriorate quickly

Functions of Money

6

Unit of Account:

Used to measure value in the economy

Reduces transaction costs

Store of Value:

Used to save purchasing power over time

Other assets also serve this function.

Money is the most liquid of all assets but loses value during inflation.

Evolution of the Payments System

7

Commodity Money: valuable, easily standardized and divisible commodities (e.g. precious metals, cigarettes)

Fiat Money: paper money decreed by governments as legal tender

Checks: an instruction to your bank to transfer money from your account

Electronic Payment (e.g. online bill pay).

E-Money (electronic money):

Debit card

Stored-value card (smart card)

E-cash

Measuring Money

8

How do we measure money? Which particular assets can be called “money”?

Construct monetary aggregates using the concept of liquidity:

M1 (most liquid assets) = currency + travelerʼs checks + demand deposits + other checkable deposits

M2 (adds to M1 other assets that are not so liquid) = M1 + small denomination time deposits + savings d

 I need 1500 words essa excluding  excluding the title, equations, figures, diagrams, tables, footnotes and references). Instructions are given in word file. Please follow the instructions carefully FACULTY OF BUSINESS AND LAW SCHOOL OF ACCOUNTING, ECONOMICS AND FINANCE International Banking, Financial Markets, and Monetary Policy International Banking, Financial Markets, and Monetary Policy Coursework Essay 2022-23 Essay Questions You are required to write a 1,500-word essay (excluding the title, equations, figures, diagrams, tables, footnotes and references) in response to the following task: Bitcoin has received a large amount of attention since its introduction in 2008. Critically discuss (i) if cryptocurrencies such as Bitcoin are the future of money, AND (ii) if cryptocurrencies have impact on UK monetary aggregates. Your essay should make use of financial or economic theory and data that are relevant to the argument you want to make. You may include graphs, figures and tables that are helpful to illustrate your arguments. Further instructions for this coursework assignment This is an individual assignment, and your essay mark will account for 40% of your overall mark for the module. This piece of work will address learning outcomes 3 and 5 as set out in the module descriptor. 3. Assess the appropriateness of policies aimed at various economic and financial market problems. 5. Compose and present scholarship to a professional standard. Word Count Your essay should be no more than 1,500 words excluding the title, equations, figures, diagrams, tables, footnotes and references. Students are NOT permitted to exceed the word limit by 10% or any other amount. Coursework that exceeds 1,500 will not be read beyond the stated word count. Referencing Requirements Your essays will be inspected for plagiarism. Please use the APA 7th edition referencing style. Referencing is a vital part of your academic studies and research at University of Portsmouth. See https://library.port.ac.uk/w683.htm l for more on why you need to be concerned about plagiarism and referencing. Additional guidance on these important matters can be found at the dedicated library page https://library.port.ac.uk/ref/page2.html. Reference should be made to the primary source, except when the primary source can no longer be obtained. P International Banking, Financial Markets and Monetary Policy Lecture 6. Monetary Policy (I) International Banking, Financial Markets and Monetary Policy 2 Topic 1: Money and Banks Topic 2: Roles of Banking • Topic 3: Monetary Policy Topic 4: Financial Crises Topic 5: Financial Technology (FinTech) Lecture 6 Outline 3 Topic 3: Monetary Policy A key measure of the economy’s performance in the short run The causes of the financial crisis that began in the summer of 2007 and where the economy currently stands The first building block of our short-run model: the IS curve Trends and Fluctuations 4 Output is equal to the long-run trend plus short-run fluctuations: Short-run fluctuation: Trends and Fluctuations Economic Fluctuations and Short-Run Output 5 Quiz 6 Potential output is £100 in 2010. Actual output is £110 in 2010. Actual output in 2009 was £105. Short-run output for 2010 is (1) £10 (2) £5 10 percent 5 percent Stylised Facts 7 Stylised Facts 8 Stylised Facts Inflation in the United States 9 Three Premises 10 The Short-run model is based on three premises: The economy is constantly being hit by shocks: shock: Factors that cause fluctuations in output or inflation Monetary and fiscal policies affect output: Policy makers may be able to neutralise shocks to the economy There is a dynamic trade-off between output and inflation: The Phillips curve is the dynamic trade-off between output and inflation A Graph of the Phillips Curve 11 The Great Recession: A First Look 12 Housing Price Bubble Forms – Between mid-2006 and the first quarter of 2012, the national index for housing prices plummeted by 36 percent The Great Recession: A First Look 13 Global Saving Glut – Ben Bernake March 2005: “global saving glut“, Glut = “excess” The US had an excess of savings with desire to invest Higher investment demand contributed to rising asset prices in the housing market The saving glut led to low interest rates, and many borrowers took out mortgages to buy homes between 2000 and 2006 Many of these borrowers were subprime Between 2004 and 2006, the Fed raised its interest rate International Banking, Financial Markets and Monetary Policy Lecture 5. Roles of Banking (Part II) International Banking, Financial Markets and Monetary Policy 2 Topic 1: Money and Banks • Topic 2: Roles of Banking Topic 3: Central Bank and Monetary Policy Topic 4: Financial Crises Topic 5: Financial Technology (FinTech) Preliminaries 3 a) Balance Sheet Balance Sheet (Report of Condition): lists assets (financial outputs) and liabilities (financial inputs), Refers to a particular point in time (financial stocks) A stylised Balance Sheet: Preliminaries 4 b) Income Statement Income Statement (Profit and Loss Account): lists revenues and expenses, Refers to a particular time period (financial flows) A stylised Balance Sheet: Preliminaries 5 Asset Transformation Maturity Transformation: Liabilities of banks tend to be short-term and relatively liquid, Assets of banks tend to be long-term and relatively illiquid Exposure to liquidity risk, Need for appropriate liquidity management 2) Risk Transformation: Liabilities of banks are (supposed to be) relatively safe, Assets of banks can be relatively risky. Exposure to default risk, Need for appropriate adequacy management Liquidity Management – Small Liquidity Shocks 6 a) Scenario Liquidity Management: A bank needs to acquire sufficiently liquid assets to meet its obligations to depositors. Assumptions: Bank must hold a fraction 𝛾 of deposits as reserves, Bank experiences a small deposit outflow 𝑥 . Initial Balance Sheet: Liquidity Management – Small Liquidity Shocks 7 b) Numerical Example Assumptions: Bank must hold a fraction 10% of deposits as reserves, Bank experiences a small deposit outflow £10 . Initial Balance Sheet: Resulting T-Account: Liquidity Management – Small Liquidity Shocks 8 c) The General Case Resulting T-Account: Results: If a bank has ample excess reserves: 𝑅𝑒𝑥𝑐 ≥ 1 − 𝛾 𝑥 (1) a deposit outflow will not force changes in other balance sheet items. Liquidity Management – Small Liquidity Shocks 9 d) Conclusion Implications of a Small Liquidity Shock: If a bank experiences a small liquidity s International Banking, Financial Markets and Monetary Policy Lecture 3. Roles of Banking International Banking, Financial Markets and Monetary Policy 2 Topic 1: Money and Banks • Topic 2: Roles of Banking Topic 3: Central Bank and Monetary Policy Topic 4: Financial Crises Topic 5: Financial Technology (FinTech) Lecture 3 Outline 3 Topic 2: Roles of Banking Summarise how transaction costs affect financial intermediaries Describe why asymmetric information leads to adverse selection and moral hazard Preliminaries 4 a) Modes of Financing Bonds versus Stocks: A bond is a debt security that promises to make payments periodically for a specified period of time. A (common) stock is an equity security that represents a share of ownership in a corporation. It is a claim on the residual earnings and assets of the corporation. Direct Finance vs Indirect Finance: Direct finance via financial markets. Indirect finance via financial intermediaries. Preliminaries 5 b) Frictions in Financial Relationships Transaction Costs: Time and money spent in carrying out financial transactions. Asymmetric Information Adverse Selection (hidden characteristics) → Avoid selecting an unwanted transaction partner. Moral Hazard (hidden action) → Ensure that transaction partner will not engage in unwanted activities. Preliminaries c) Stylised Facts Sources of External Funds for Non-financial Businesses 6 Preliminaries 7 Stylised Facts Basic Facts about Financial Structure: Direct finance: Issuing marketable debt and equity securities is not the primary way in which businesses finance their operations. Stocks are not the most important sources of external financing for businesses. Only large, well-established corporations have easy access to securities markets to finance their activities. 2) Indirect finance: Indirect finance is many times more important than direct finance. Financial intermediaries, particularly banks, are the most important source of external funds used to finance businesses. 3) The financial system is among the most heavily regulated sectors of the economy. Information Production – Framework a) Scenario Agents: Project Idea of Entrepreneur(s): I = Initial Investment, R = Risky Future Return. Internal Funds of Financier: Financier has more funds than needed for in International Banking, Financial Markets and Monetary Policy Lecture 4. Roles of Banking International Banking, Financial Markets and Monetary Policy 2 Topic 1: Money and Banks • Topic 2: Roles of Banking Topic 3: Central Bank and Monetary Policy Topic 4: Financial Crises Topic 5: Financial Technology (FinTech) Lecture 4 Outline 3 Topic 2: Roles of Banking Summarise how transaction costs affect financial intermediaries Describe why asymmetric information leads to adverse selection and moral hazard Preliminaries 4 Modes of Financing Bonds versus Stocks: A bond is a debt security that promises to make payments periodically for a specified period of time. A (common) stock is an equity security that represents a share of ownership in a corporation. It is a claim on the residual earnings and assets of the corporation. Direct Finance vs Indirect Finance: Direct finance via financial markets. Indirect finance via financial intermediaries. Preliminaries 5 b) Stylised Facts Sources of External Funds for Non-financial Businesses Preliminaries 6 Stylised Facts Basic Facts about Financial Structure: Direct finance: Issuing marketable debt and equity securities is not the primary way in which businesses finance their operations. Stocks are not the most important sources of external financing for businesses. Only large, well-established corporations have easy access to securities markets to finance their activities. 2) Indirect finance: Indirect finance is many times more important than direct finance. Financial intermediaries, particularly banks, are the most important source of external funds used to finance businesses. 3) The financial system is among the most heavily regulated sectors of the economy. Preliminaries 7 Frictions in Financial Relationships Transaction Costs: Time and money spent in carrying out financial transactions. Asymmetric Information Adverse Selection (hidden characteristics) → Avoid selecting an unwanted transaction partner. Moral Hazard (hidden action) → Ensure that transaction partner will not engage in unwanted activities. Information Production – Framework 8 a) Scenario Agents: Project Idea of Entrepreneur(s): I = Initial Investment, R = Risky Future Return. Internal Funds of Financier: Financier has more funds than International Banking, Financial Markets and Monetary Policy Lecture 1. Money and Banks (1) International Banking, Financial Markets and Monetary Policy 2 • Topic 1: Money and Banks Topic 2: Roles of Banking Topic 3: Central Bank and Monetary Policy Topic 4: Financial Crises Topic 5: Financial Technology (FinTech) Lecture 1 Outline 3 Topic 1: Money and Banks (1) Describe what money is List and summarise the functions of money Identify different types of payment systems Compare and contrast the M1 and M2 money supplies Understand the quantity theory of money and interest rates Meaning of Money 4 Money (or the “money supply”): anything that is generally accepted as payment for goods or services or in the repayment of debts. A rather broad definition Money (a stock concept) is different from: Wealth: the total collection of pieces of property that serve to store value Income: flow of earnings per unit of time (a flow concept) Functions of Money 5 Medium of Exchange: Eliminates the trouble of finding a double coincidence of needs (reduces transaction costs) Promotes specialisation A medium of exchange must: be easily standardized be widely accepted be divisible be easy to carry not deteriorate quickly Functions of Money 6 Unit of Account: Used to measure value in the economy Reduces transaction costs Store of Value: Used to save purchasing power over time Other assets also serve this function. Money is the most liquid of all assets but loses value during inflation. Evolution of the Payments System 7 Commodity Money: valuable, easily standardized and divisible commodities (e.g. precious metals, cigarettes) Fiat Money: paper money decreed by governments as legal tender Checks: an instruction to your bank to transfer money from your account Electronic Payment (e.g. online bill pay). E-Money (electronic money): Debit card Stored-value card (smart card) E-cash Measuring Money 8 How do we measure money? Which particular assets can be called “money”? Construct monetary aggregates using the concept of liquidity: M1 (most liquid assets) = currency + travelerʼs checks + demand deposits + other checkable deposits M2 (adds to M1 other assets that are not so liquid) = M1 + small denomination time deposits + savings d

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