The main emphasis of this course is to develop the perspectives of a practicing finance professional. This course will enable students to understand the role of financial markets and institutions in shaping the economic and business environment of the nation. With the help of some simplifying frameworks and models, the students will be equipped to develop a series of applications of principles from finance and economics that explore the connection between the firm, financial markets, financial institutions and the broader economy. The financial markets studied will include money markets, bond markets, insurance markets, stock markets and currency markets. Students will study the role of financial institutions (intermediation and innovation) played by central banks, commercial banks, investment banks, insurance companies and mutual funds in facilitating the flow of funds in the economy. Keynesian IS-LM theory and the loanable funds theory provide the theoretical background for the course and help students develop simple analytical frameworks to study the interaction of individuals, firms, governments, markets and the aggregate economy. The students will also understand the role of regulation in the overall functioning of financial markets and institutions in the economy.
Prerequisites: ECO 2201 (Macroeconomic Theory 1), ECO 2202 (Macroeconomic Theory 2)