Office hours: M 13:00 - 14:00 and by appointment, room 3382

E-mail: socholz@ust.hk

Course website: http://teaching.ust.hk/~sosc359

Course objectives

·Understand the functioning of financial institutions and credit markets in China today.

·Use basic theoretical concepts to analyze monetary policy in China.

·Discuss current issues in the reform of China’s financial system.

Readings

Readings consist of one required textbook and numerous, mostly Chinese-language journal articles, individual book chapters, and regulations.

Required textbook:

Thomas Mayer et al. Money, Banking, and the Economy. Sixth edition. New York: Norton, 1996.

All required readings are available on the first floor of the library at the Reserve desk.

Requirements and grading

Grades are based on three examinations and ten assignments. The first two examinations each account for 20% of the final grade. The second examination is not cumulative. The third (final) examination is cumulative and accounts for 40% of the final grade.

There is one assignment per week for 12 weeks, graded pass/fail. You obtain 2 percentage points for each assignment you pass, up to a maximum of 20. Assignment questions may refer to the readings, additional readings handed out in class, to the material covered in the previous class, ask for your thoughts on an upcoming topic, or require a short internet or library search. Assignment questions will typically be posted on the course website on Wednesday after class, and answers are due on the following Monday by 14:00 (at the beginning of class). All assignments are exam-relevant.

The examination schedule is as follows:

First exam4 March

Second exam27 March

Third examIn examination period, as announced by ARR

Course structure

I.Money and Financial Institutions

A.Functions of Money

B.Financial System Overview

C.Depository Institutions

D.Central Bank

II.Money and Banking in a Socialist Economy

III.Monetary Theory

A.Commodity Market

1.Quantity Theory

2.Income-expenditure approach: Commodity market and IS curve

B.Money Market

1.Money Supply

2.Money Demand

3.Equilibrium

C.Complete Model

1.Two-Market Model

2.Three-Market Model

3.Four-Market Model

IV.Monetary Policy

A.The Goals of Monetary Policy

B.The Tools of Monetary Policy

C.Targets and Instruments

D.The Impact of Monetary Policy

E.Can Countercyclical Monetary Policy Succeed?

Reading list (Readings in parentheses are not required.)

30 January: Functions of Money

Textbook, Chapter 1

4 February: Financial System Overview

Textbook, Chapter 2

???. ??????. ??: ???????, 1997, pp. 245-8, 287-296, 322-8.

6, 11, and 18 February: Depository Institutions

Textbook, Chapters 6, 7

???. ??????. ??: ???????, 1997, pp. 72-103, 147-58.

Holz, Carsten. “China’s Monetary Reform: The Counterrevolution from the Countryside.” Journal of Contemporary China 10, no. 27 (May 2001): 189-217.

Assignment 1 (due 11 February):

??????????????????????????. ??????, no. 16 (18 April 2001).

???, ???????????. ??????, no. 18 (28 April 2001).

Assignment 2 (due 18 February):

???????????????. ??????, no. 23 (8 June 2001).

???????????????. ??????, no. 21 (23 May 2001).

20 and 25 February: Central Bank

Textbook, Chapter 11

???. ??????. ??: ???????, 1997, pp. 45-52, 58-72.

??????2000??, pp. 42-8, 72-9.

Assignment 3 (due 25 February):

???????????????. ????????????, no. 14 (20 May 2000): 5-7.

??????????.??????, no. 8 (31 March 2000).

27 February: Foreign exchange market, balance of payments

???. ??????. ??: ???????, 1997, pp. 421-44.

???????2000???. pp. 17f, 22f, 27f, 32, 35, 59-68.

(Textbook, Chapter 30)

4 March: First mid-term exam

6 and 11 March: Money and Banking in a Socialist Economy

Holz, Carsten. “The Changing Role of Money in China and Its Implications.” Comparative Economic Studies 42, no. 3 (Fall 2000): 77-100, in particular pp. 77-87.

Assignment 4 (due 11 March):

??????????????????????????. 15 Feb. 1994. In 1994 ????????. ??: ???????, 1995, pp. 25-31.

??????????<???????>???. 30 Nov. 1995. In 1995 ????????. ??: ???????, 1996, pp. 141-6.

??????????<??????????>???. 29 June 1996. In 1996 ????????. ??: ???????, 1997, pp. 15-9.

13 and 18 March: Monetary Theory: Commodity Market

Textbook, Chapters 15, 16 as covered in class; also pp. 321-2 in Chapter 18

McCallum, Bennett. Monetary Economics: Theory and Policy. New York: Macmillan Publishing Company, 1989, pp. 77-82.

Assignment 5 (due 18 March):

???????????????????. ???????, no. 21 (15 Nov. 2001): 17-22.

??????????????. ??????, no. 33 (18 Nov. 2000).

20 and 25 March: Monetary Theory: Money Market

Textbook, Chapters 12-14

????????????????????. 27 Oct. 1994. In ?????????. ?????????????. ??:???????, 1995, pp. 80-82.

Assignment 6 (due 25 March):

??????????<?????????????????????>???. ????????, no. 24 (14 Dec. 2001): 13-16

??????????????????????????. ???????, no. 4 (28 Feb. 2001): 8-11.

?????????????????????. ??????, no. 31 (16 Oct. 2000).

27 March: Second mid-term exam

8 and 10 April: Monetary Theory: Two-Market Model, Three-Market Model

Textbook, Chapter 18 (and Chapter 19)

Assignment 7 (due 8 April):

???????????????????????????????. ????????????, no. 18 (30 June 2001): 12-15.

??????????????. ??????, no. 34 (27 Nov. 2001).

15, 17, and 22 April: Monetary Theory: Four-Market Model

McCallum, Bennett. Monetary Economics: Theory and Policy. New York: Macmillan Publishing Company, 1989, pp. 85-102.

Assignment 8 (due 15 April)

Assignment 9 (due 22 April)

24 and 29 April: Goals and Tools of Monetary Policy

Textbook, Chapters 22, 23

???. ??????. ??: ???????, 1997, pp. 52-58.

??????2000??, pp. 32-41.

Assignment 10 (due 29 April):

??. ???????????????????. ????, no. 5 (2000): 31-38, 46.

Ding, X.L. “Systemic Irregularity and Spontaneous Property Transformation in the Chinese Financial System.” China Quarterly, no. 163 (Sept. 2000): 655-76.

6 May: Targets and Instruments of Monetary Policy

Textbook, Chapter 24

???. ????????. ??: ???????, 1993, pp. 42-52.

Assignment 11 (due 6 May):

??, ??. ???????????????????????. ????, no. 8 (2001): 33-43.

8 May: Impact of Monetary Policy, Can Countercyclical Policy Succeed?

Textbook, Chapters 25 and 26 as covered in class

Yu Qiao, and Xie Ping. “Money Aggregates Management: Problems and Prospects in China’s Economic Transition.” Contemporary Economic Policy 17, no. 1 (Jan. 1999): 33-43.

2001?????????????. ????????, no. 20-21 (5 Nov. 2001): 3-24.

???????????????????. ??????, no. 47 (21 Dec. 2000).

13 May: ChinaBad Loan Problem

Assignment 12 (due 13 May):

??????????. ????????, no. 1 (6 Jan. 2001): 8-11.

???????????????. ???????, no. 1 (15 Jan. 2001): 9f.

?????????????????????. ??????, no. 37 (8 Dec. 2000).

????????????????????. ??????, no. 27 (20 July 2001).

15 May: Review

Reference items on China’s financial system

Statistical data: ??????????. Library reference section HG3331.C47.

Statistical data and short reports on various aspects of China’s financial system: ??????2001. (Or any earlier year.) ??: ???????. Library reference section HG3334.C472.