EC21A


5123286

Room 17/Economics

ECON3011 : Economics of Financial Institutions

Course Description

This course examines the role of the major financial institutions in the financial system.  It also highlights the basic principles of financial management of individual financial institutions. The course profiles the financial, operational and organizational characteristics of the major financial institutions operating in the Caribbean .  In addition, it examines the various services provided by both banks and non-bank financial intermediaries (NBFIs). NBFIs, which are analysed, include building societies, credit unions, and insurance companies.  Issues related to offshore banking are discussed.  Informal financial institutions are also examined.  Financial sector problems, which have affected many developing countries in recent years, are analysed.  Modern developments such as electronic money and remittances will also be discussed in the context of the current impact of the economy on financial institutions.

Pre-requisite

 

EC21A (ECON2002): Intermediate Macroeconomics I

 

 


Course Outline

 

1.      Financial institutions in the economy.

 

2.      The economic and financial environment in which financial institutions operate. Performance Analysis of Financial Institutions

3.      Structure and regulation of Financial Institutions

 

4.      The Financial Sector in small economies.

5.      Selected areas in management of financial institutions

a.       Liquidity management

b.      Lending policies

c.       Lending policies

d.      Investment management.

e.       Mobilization of funds

f.         Capital management

g.       Asset/Liability Management.

6.      Credit Unions: Structure, principal sources and uses of funds.

 

7.      Life and non-life insurance companies: Structure, principal sources and uses of funds.

 

8.      Development Banks: Structure, principal sources and uses of funds.

 

9.      Informal financial institutions: Structure, principal sources and uses of funds.

 

10.  Offshore banking.

 

11.  Financial Sector Crises and Responses

 

12.  Current Topics

 

 

Teaching Method

This course will be taught by a combination of lectures, guest presentations, and group discussions.  Students will be required to participate in class discussions based on the readings indicated in course outline. Students are advised to be up to date with the assigned readings.

 

 

 

 

Prescribed Texts

Madura, Jeff. Financial Markets and Institutions. Thomson & South-Western, 6th Edition, 2003 (JM).

Mishkin, S. Frederic and Stanley G. Eakins. Financial Markets + Institutions. Pearson Addison Wesley, 5th Edition, 2006 (MSSE)

Course Assessment

Extended Essay:             30%

 

Mid-semester exam:      20%

 

Final Examination:           50%

Plagiarism :    -100%

 

 

Recommended Texts

Clarke, L. and D. Danns (Eds.). The Financial Evolution of the Caribbean Community 1970-1996, Caribbean Centre for Monetary Studies, UWI St. Augustine, Trinidad , 1997 (CD).

 

 

Odle, M. Banking, Finance and Caribbean Development, presented at the XXX Annual Monetary Studies Conference, Bahamas , October 1998 (MO).

 

 

Rose, P. and James W. Kolari. Financial Institutions. Understanding and Managing Financial Services, Richard D. Irwin Inc., 1995

 

 

 

Additional Readings

 

Allen, L. Capital Markets and Institutions: A Global View, John Wiley & Sons, Inc., 1997. Chapter 4.

 

 

Bank of Jamaica (BOJ), Bank of Jamaica: The First 40 Years (1961-2000), Bank of Jamaica, Kingston , 2004.

 

 

Boyd, D. “Monetary Policy, Central Banks and Economic Performance in the Caribbean ”, presented at the XXXV Annual Conference of Monetary Studies.

St.Kitts, November 2003

 

 

Brewster, Havelock R. “ Caribbean Development Strategy and the Future Role of the Caribbean Development Bank”, Paper Presented at CDB 25th Anniversary Seminar, 1995.

 

 

Demirguc-Kunt, A. and E. Detragiache , “The Determinants of Banking Crises:

Evidence from Developing and Developed Countries”, IMF Working Paper 97/106.

 

 

DeSilva, C. and P. Forde (Eds.). The Financial System of Trinidad and Tobago . Central Bank of Trinidad and Tobago , 1994.

 

 

 

 

Ferrachio-Williams, J., O.Williams and Everette Martin, “Recent Developments in the Offshore Financial Services Industry”, Central Bank of Barbados, Annual Review Seminar, Barbados , September, 1998.

 

 

 

 

Fraser, L. and A. Ormiston. Understanding Financial Statements (Fifth Edition), New York , Prentice Hall, 1998, (Chapters 2,3,4,5).

 

 

 

 

Ganga, Gobind N. “The Insurance Sector and Financial System in Guyana ”, SES, Volume 45, 1996, pp. 179-194.

 

 

Germidis, D. et.al. Financial Systems and Development: What Role for the Formal and the Informal Sectors? Development Centre of the Organization for Economic Cooperation and Development, Paris , 1991.

 

 

Handa, S. and C.Kirton, “Testing the Economic Theory of Rotating Savings and Credit Associations: Evidence from the Jamaican `Partner’”, ISER, UWI, Working Paper No. 44, 1999.

 

 

Johnson, A. “An examination of building societies in the context of financial liberalization and deregulation: Jamaica 1990 - 95”, Paper presented at XXVII Annual Conference of Monetary Studies, St. Kitts, 1995.

 

 

 

 

Kirton, C. “Credit Unions in Jamaica:  Structure, Performance and Prospects” in Worrell, D., Compton Bourne and Dinesh Dodhia (Eds.), Financing Development in the Commonwealth Caribbean, Macmillan Education Ltd., London , 1991.

 

 

 

 

Kirton, C. "Rotating Savings and Credit Associations in Jamaica : Some Empirical findings on Partner", SES, Vol. 45, Nos. 2 & 3, December 1996.

Lawrence, T. “The Fragility of Financial Institutions in the Caribbean”, Central Bank of Barbados Working Paper, 2000, pp. 221-238

 

 

 

 

 

 

 

 

Lee, J. “The Management and Prevention of Financial Crisis,”2002. Chapter 4

<http://r0.unctad.org/p166/module2002Bangk/mod2/TDR209820p1c4.pdf>

 

 

Lue Lim, G. Jamaica\\\'s financial system - its historical development. Bank of Jamaica (BOJ), 1994.

 

 

 

 

McPherson, I. Hands Around the Globe – A History of the International Credit Union Movement and the Role and Development of the World Council of Credit Unions Inc, Horsdal and Schubart Publishers Ltd, Victoria, BC, Canada , 1999. Chapter 9.

 

 

<http://www.caledonia.org.uk/cu_prins.htm#Operating%20Principles. >

Indiana Credit Union League, “What is a Credit Union?” 2004.

        <http://www.icul.org/what_is.asp>

                                                                              

Mishkin, F. “Understanding Financial Crises: A Developing Country Perspective,” NBER Working Paper Series 5600, May 1996.

            <http://www-1.gsb.columbia.edu/faculty/fmishkin/PDFpapers/w5600.pdf>

 

 

 

 

Outreville, J.F. "Life insurance in developing countries: a cross-country analysis", UNCTAD Discussion Papers, No. 93, UNCTAD, Geneva , 1994.

 

 

Polius, T. and L. Sahely. “Predicting Bank Performance in the Eastern Caribbean Currency Union”, presented at the XXXV Annual Conference of Monetary Studies. St. Kitts, November 2003.

 

 

Reilly, F. and K. Brown, Investment Analysis and Portfolio Management. (7th Edition), South-Western Press, 2003.Chapters 7, 17.

 

 

Schroeder, S. “A Minskian Analysis of Financial Crisis in Developing Countries”

Centre for Economic Policy Analysis Working Paper 2002- 2009, August 2002.

<http://www.newschool.edu/cepa/papers/archive/cepa200209.pdf>

 

 

Smith, A. “Overview of the Offshore Financial Services in the Caribbean and Threats to its Existence”, Department of Economics, UWI, Mona, Jamaica (mimeo), August 2000.

 

 

Worrell, D. “Bank Behaviour and Monetary Policy in Small Open Economies with Reference to the Caribbean ”, SES, Volume 46, 1997, pp. 59-74.

 

 

http://www.jstor.org link to various journals

 

 

http://www.econlit.org American Economic Association journal site

 

 

http://www.imf.org International Monetary Fund

 

 

http://www.worldbank.org The World Bank

 

 

http://oecd.org/eco/wp/omline.htm Organisation for Economic Cooperation and Development

 

 

http://www.bis.org The Bank for International Settlements

 

 

http://www.woccu.org  World Council of Credit Unions

 

 

 

 

ADDITIONAL READINGS WILL BE GIVEN IN CLASS BY LECTURER.