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 About the Author

Frederic S. Mishkin is the Alfred Lerner Professor of Banking and Financial

Institutions at the Graduate School of Business, Columbia University.
He is also a Research Associate at the National Bureau of Economic
Research, co-director of the U.S. Monetary Policy Forum, a member of
the Squam Lake Working Group on Financial Reform, and past president
of the Eastern Economics Association. Since receiving his Ph.D. from
the Massachusetts Institute of Technology in 1976, he has taught at the
University of Chicago, Northwestern University, Princeton University,
and Columbia. He has also received an honorary professorship from
the People’s (Renmin) University of China. From 1994 to 1997, he was
Executive Vice President and Director of Research at the Federal Reserve
Bank of New York and an associate economist of the Federal Open Market
Committee of the Federal Reserve System. From September 2006 to
August 2008, he was a member (governor) of the Board of Governors of
the Federal Reserve System.
Professor Mishkin’s research focuses on monetary policy and its impact on
financial markets and the aggregate economy. He is the author of more than
twenty books, including Macroeconomics: Policy and Practice, Second Edition
(Pearson, 2015); Financial Markets and Institutions, Ninth Edition (Pearson, 2018); Monetary
Policy Strategy (MIT Press, 2007); The Next Great Globalization: How Disadvantaged Nations
Can Harness Their Financial Systems to Get Rich (Princeton University Press, 2006); Inflation
Targeting: Lessons from the International Experience (Princeton University Press, 1999); Money,
Interest Rates, and Inflation (Edward Elgar, 1993); and A Rational Expectations Approach to
Macroeconometrics: Testing Policy Ineffectiveness and Efficient Markets Models (University of
Chicago Press, 1983). In addition, he has published more than 200 articles in such journals
as American Economic Review, Journal of Political Economy, Econometrica, Quarterly Journal of
Economics, Journal of Finance, and Journal of Monetary Economics.
Professor Mishkin has served on the editorial board of American Economic Review and
has been an associate editor at Journal of Business and Economic Statistics, Journal of Applied
Econometrics, Journal of Economic Perspectives, Journal of International Money and Finance, and
Journal of Money, Credit and Banking; he also served as the editor of the Federal Reserve Bank
of New York’s Economic Policy Review. He is currently an associate editor (member of the
editorial board) at six academic journals, including International Finance; Finance India; Review
of Development Finance; Borsa Economic Review; PSU Research Review and Emerging Markets, and
Finance and Trade. He has been a consultant to the Board of Governors of the Federal Reserve
System, the World Bank, and the International Monetary Fund, as well as to many central
banks throughout the world. He was also a member of the International Advisory Board to
the Financial Supervisory Service of South Korea and an advisor to the Institute for Monetary
and Economic Research at the Bank of Korea. Professor Mishkin was a Senior Fellow at the
Federal Deposit Insurance Corporation’s Center for Banking Research and was an academic
consultant to and serves on the Economic Advisory Panel and Monetary Advisory Panel of
the Federal Reserve Bank of New York.

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 Brief Contents

PART 1 Introduction 1
1 Why Study Money, Banking, and Financial Markets?.....................................................2
2 An Overview of the Financial System............................................................................... 22
3 What Is Money?..................................................................................................................... 49

PART 2 Financial Markets 63

4 The Meaning of Interest Rates........................................................................................... 64
5 The Behavior of Interest Rates........................................................................................... 86
6 The Risk and Term Structure of Interest Rates............................................................. 117
7 The Stock Market, the Theory of Rational Expectations, and the
Efficient Market Hypothesis.............................................................................................. 141

PART 3 Financial Institutions 163

8 An Economic Analysis of Financial Structure............................................................... 164
9 Banking and the Management of Financial Institutions........................................... 188
10 Economic Analysis of Financial Regulation.................................................................. 217
11 Banking Industry: Structure and Competition............................................................. 236
12 Financial Crises..................................................................................................................... 268

PART 4 Central Banking and the Conduct of Monetary Policy 293

13 Central Banks and the Federal Reserve System........................................................... 294
14 The Money Supply Process............................................................................................... 318
15 Tools of Monetary Policy................................................................................................... 343
16 The Conduct of Monetary Policy: Strategy and Tactics............................................. 369

PART 5 International Finance and Monetary Policy 403

17 The Foreign Exchange Market.......................................................................................... 404
18 The International Financial System................................................................................ 432

PART 6 Monetary Theory 461

19 Quantity Theory, Inflation, and the Demand for Money......................................... 462
20 The IS Curve.......................................................................................................................... 480
21 The Monetary Policy and Aggregate Demand Curves.............................................. 500
22 Aggregate Demand and Supply Analysis...................................................................... 515
23 Monetary Policy Theory.................................................................................................... 559
24 The Role of Expectations in Monetary Policy.............................................................. 588
25 Transmission Mechanisms of Monetary Policy........................................................... 608

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 x Brief Contents

Additional Chapters on MyLab Economics

1 Financial Crises in Emerging Market Economies
2 The ISLM Model
3 Nonbank Finance
4 Financial Derivatives
5 Conflicts of Interest in the Financial Services Industry

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 Contents in Detail

PART 1 Introduction 1
CHAPTER 1
Why Study Money, Banking, and Financial Markets? 2
Why Study Financial Markets?......................................................................................................2
Debt Markets and Interest Rates.............................................................................................. 3
The Stock Market.................................................................................................................... 3
Why Study Financial Institutions and Banking?........................................................................5
Structure of the Financial System............................................................................................ 5
Banks and Other Financial Institutions.................................................................................... 6
Financial Innovation............................................................................................................... 6
Financial Crises....................................................................................................................... 6
Why Study Money and Monetary Policy?..................................................................................7
Money and Business Cycles..................................................................................................... 7
Money and Inflation................................................................................................................ 7
Money and Interest Rates......................................................................................................... 9
Conduct of Monetary Policy.................................................................................................... 9
Fiscal Policy and Monetary Policy.......................................................................................... 10
Why Study International Finance?............................................................................................ 11
The Foreign Exchange Market............................................................................................... 12
The International Financial System........................................................................................ 13
Money, Banking, and Financial Markets and Your Career.................................................. 14
How We Will Study Money, Banking, and Financial Markets............................................ 14
Exploring the Web................................................................................................................ 15
Collecting and Graphing Data............................................................................................... 15
Web Exercises....................................................................................................................... 15
Concluding Remarks..................................................................................................................... 15
Summary 15  •  Key Terms 16  •  Questions 16  •  Applied Problems 17  •  
Data Analysis Problems 17  •   Web Exercises 18  •   Web References 18

APPENDIX TO CHAPTER 1
Defining Aggregate Output, Income, the Price Level,
and the Inflation Rate 19
Aggregate Output and Income.................................................................................................. 19
Real Versus Nominal Magnitudes............................................................................................. 19
Aggregate Price Level.................................................................................................................... 20
Growth Rates and the Inflation Rate........................................................................................ 21

CHAPTER 2
An Overview of the Financial System 22
Function of Financial Markets.................................................................................................... 22
Structure of Financial Markets.................................................................................................... 25
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 xii Contents in Detail

Debt and Equity Markets....................................................................................................... 25

Primary and Secondary Markets............................................................................................ 25
Exchanges and Over-the-Counter Markets............................................................................. 26
Money and Capital Markets................................................................................................... 27
Financial Market Instruments..................................................................................................... 27
Money Market Instruments................................................................................................... 27

Following the Financial News Money Market Rates 28

Capital Market Instruments................................................................................................... 29

Following the Financial News Capital Market Interest Rates 30

Internationalization of Financial Markets............................................................................... 31
Global Are U.S. Capital Markets Losing Their Edge? 32
International Bond Market, Eurobonds, and Eurocurrencies................................................. 32
World Stock Markets............................................................................................................. 33
Function of Financial Intermediaries: Indirect Finance....................................................... 33
Following the Financial News Foreign Stock Market Indexes 34
Transaction Costs.................................................................................................................. 34

Global The Importance of Financial Intermediaries Relative to Securities Markets:

An International Comparison 35
Risk Sharing.......................................................................................................................... 36
Asymmetric Information: Adverse Selection and Moral Hazard............................................. 36
Economies of Scope and Conflicts of Interest........................................................................ 38
Types of Financial Intermediaries.............................................................................................. 38
Depository Institutions.......................................................................................................... 38
Contractual Savings Institutions............................................................................................ 40
Investment Intermediaries..................................................................................................... 41
Regulation of the Financial System........................................................................................... 42
Increasing Information Available to Investors......................................................................... 42
Ensuring the Soundness of Financial Intermediaries.............................................................. 43
Financial Regulation Abroad.................................................................................................. 45

Summary 45  •  Key Terms 46  •  Questions 46  •  Applied Problems 47  •  

Data Analysis Problems 48  •   Web Exercises 48  •   Web References 48

CHAPTER 3
What Is Money? 49
Meaning of Money........................................................................................................................ 49
Functions of Money...................................................................................................................... 50
Medium of Exchange............................................................................................................. 50
Unit of Account..................................................................................................................... 51
Store of Value........................................................................................................................ 52
Evolution of the Payments System............................................................................................ 53
Commodity Money............................................................................................................... 53
Fiat Money............................................................................................................................ 53

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Checks.................................................................................................................................. 53
Electronic Payment................................................................................................................ 54
E-Money............................................................................................................................... 54

FYI Are We Headed for a Cashless Society? 55

APPLICATION Will Bitcoin Become the Money of the Future?.................................. 55

Measuring Money.......................................................................................................................... 56
The Federal Reserve’s Monetary Aggregates........................................................................... 56

Following the Financial News The Monetary Aggregates 57

FYI Where Are All the U.S. Dollars? 58
Summary 59  •  Key Terms 60  •  Questions 60  •  Applied Problems 61  •  Data Analysis
Problems 62  •  Web Exercises 62  •  Web References 62

PART 2 Financial Markets 63

CHAPTER 4
The Meaning of Interest Rates 64
Measuring Interest Rates............................................................................................................. 64
Present Value......................................................................................................................... 64

APPLICATION Simple Present Value............................................................................ 66

APPLICATION How Much Is That Jackpot Worth?..................................................... 66

Four Types of Credit Market Instruments.............................................................................. 67
Yield to Maturity................................................................................................................... 68

APPLICATION Yield to Maturity on a Simple Loan..................................................... 68

APPLICATION Yield to Maturity and the Yearly Payment on a Fixed-Payment Loan..... 70

APPLICATION Yield to Maturity and the Bond Price for a Coupon Bond.................. 71

APPLICATION Yield to Maturity on a Perpetuity........................................................ 73

APPLICATION Yield to Maturity on a Discount Bond................................................. 74

The Distinction Between Interest Rates and Returns........................................................... 75
Global Negative Interest Rates? Japan First, Then the United States, Then Europe 76
Maturity and the Volatility of Bond Returns: Interest-Rate Risk.............................................. 78
Summary............................................................................................................................... 79
The Distinction Between Real and Nominal Interest Rates............................................... 81
APPLICATION Calculating Real Interest Rates............................................................ 82
Summary 83  •  Key Terms 83  •  Questions 83  •  Applied Problems 84  •  Data Analysis
Problems 85  •  Web Exercises 85  •  Web References 85

CHAPTER 4 APPENDIX
Measuring Interest-Rate Risk: Duration
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CHAPTER 5
The Behavior of Interest Rates 86
Determinants of Asset Demand................................................................................................. 86
Wealth................................................................................................................................... 87
Expected Returns.................................................................................................................. 87
Risk....................................................................................................................................... 87
Liquidity............................................................................................................................... 88
Theory of Portfolio Choice.................................................................................................... 88
Supply and Demand in the Bond Market............................................................................... 89
Demand Curve...................................................................................................................... 89
Supply Curve........................................................................................................................ 90
Market Equilibrium............................................................................................................... 91
Supply and Demand Analysis................................................................................................ 92
Changes in Equilibrium Interest Rates..................................................................................... 92
Shifts in the Demand for Bonds............................................................................................. 93
Shifts in the Supply of Bonds................................................................................................ 96

APPLICATION Changes in the Interest Rate Due to a Change in

Expected Inflation: The Fisher Effect................................................................. 98
APPLICATION Changes in the Interest Rate Due to a Business Cycle Expansion..... 100

APPLICATION Explaining Current Low Interest Rates in Europe, Japan,

and the United States: Low Inflation and Secular Stagnation........................... 101
Supply and Demand in the Market for Money:
The Liquidity Preference Framework............................................................................. 102
Changes in Equilibrium Interest Rates in the Liquidity Preference Framework......... 105
Shifts in the Demand for Money.......................................................................................... 105
Shifts in the Supply of Money............................................................................................. 105

APPLICATION Changes in the Equilibrium Interest Rate Due to

Changes in Income, the Price Level, or the Money Supply.............................. 106
Changes in Income.............................................................................................................. 107
Changes in the Price Level................................................................................................... 107
Changes in the Money Supply............................................................................................. 107
Money and Interest Rates.......................................................................................................... 108
APPLICATION Does a Higher Rate of Growth of the Money Supply
Lower Interest Rates?........................................................................................ 110
Summary 113  •  Key Terms 113  •  Questions 113  •  Applied Problems 114  •  
Data Analysis Problems 115  •   Web Exercises 116  •   Web References 117

CHAPTER 5 APPENDIX 1
Models of Asset Pricing
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CHAPTER 5 APPENDIX 2
Applying the Asset Market Approach to a Commodity Market: The Case of Gold
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CHAPTER 5 APPENDIX 3
Loanable Funds Framework
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CHAPTER 6
The Risk and Term Structure of Interest Rates 117
Risk Structure of Interest Rates................................................................................................. 117
Default Risk......................................................................................................................... 117

FYI Conflicts of Interest at Credit-Rating Agencies and the Global Financial Crisis 121
APPLICATION The Global Financial Crisis and the Baa-Treasury Spread 122
Liquidity............................................................................................................................. 122
Income Tax Considerations................................................................................................. 123
Summary............................................................................................................................. 124

APPLICATION Effects of the Obama Tax Increase on Bond Interest Rates 124
Term Structure of Interest Rates............................................................................................... 125
Following the Financial News Yield Curves 125
Expectations Theory............................................................................................................ 127
Segmented Markets Theory................................................................................................. 130
Liquidity Premium and Preferred Habitat Theories.............................................................. 131
Evidence on the Term Structure.......................................................................................... 134

FYI The Yield Curve as a Forecasting Tool for Inflation and the Business Cycle 135
Summary............................................................................................................................. 135

APPLICATION Interpreting Yield Curves, 1980–2017.............................................. 135

Summary 137  •  Key Terms 137  •  Questions 137  •  Applied Problems 139  •  

Data Analysis Problems 139  •   Web Exercises 140  •   Web References 140

CHAPTER 7
The Stock Market, the Theory of Rational Expectations,
and the Efficient Market Hypothesis 141
Computing the Price of Common Stock............................................................................... 141
The One-Period Valuation Model........................................................................................ 142
The Generalized Dividend Valuation Model......................................................................... 143
The Gordon Growth Model................................................................................................. 143
How the Market Sets Stock Prices........................................................................................... 144
APPLICATION Monetary Policy and Stock Prices..................................................... 146

APPLICATION The Global Financial Crisis and the Stock Market........................... 146
The Theory of Rational Expectations...................................................................................... 146
Formal Statement of the Theory.......................................................................................... 148
Rationale Behind the Theory............................................................................................... 148
Implications of the Theory.................................................................................................. 149
The Efficient Market Hypothesis: Rational Expectations in Financial Markets........... 150

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Rationale Behind the Hypothesis......................................................................................... 151

Random-Walk Behavior of Stock Prices............................................................................... 152

Global Should Foreign Exchange Rates Follow a Random Walk? 153

APPLICATION Practical Guide to Investing in the Stock Market.............................. 153
How Valuable Are Published Reports by Investment Advisers?............................................ 153
Should You Be Skeptical of Hot Tips?.................................................................................. 154

FYI Should You Hire an Ape as Your Investment Adviser? 155

Do Stock Prices Always Rise When There Is Good News?.................................................... 155
Efficient Market Prescription for the Investor....................................................................... 155
Why the Efficient Market Hypothesis Does Not Imply That
Financial Markets Are Efficient........................................................................................ 156
APPLICATION What Do Stock Market Crashes Tell Us About the Efficient
Market Hypothesis and the Efficiency of Financial Markets?........................... 157
Behavioral Finance...................................................................................................................... 157
Summary 158  •  Key Terms 159  •  Questions 159  •  Applied Problems 160  •  
Data Analysis Problems 161  •   Web Exercises 160  •   Web References 161

CHAPTER 7 APPENDIX
Evidence on the Efficient Market Hypothesis
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PART 3 Financial Institutions 163

CHAPTER 8
An Economic Analysis of Financial Structure 164
Basic Facts About Financial Structure Throughout the World......................................... 164
Transaction Costs......................................................................................................................... 167
How Transaction Costs Influence Financial Structure.......................................................... 167
How Financial Intermediaries Reduce Transaction Costs..................................................... 168
Asymmetric Information: Adverse Selection and Moral Hazard.................................... 169
The Lemons Problem: How Adverse Selection Influences Financial Structure.......... 169
Lemons in the Stock and Bond Markets............................................................................... 170
Tools to Help Solve Adverse Selection Problems.................................................................. 170

FYI The Enron Implosion 172

How Moral Hazard Affects the Choice Between Debt and Equity Contracts............. 175
Moral Hazard in Equity Contracts: The Principal–Agent Problem........................................ 175
Tools to Help Solve the Principal–Agent Problem................................................................ 176
How Moral Hazard Influences Financial Structure in Debt Markets............................. 178
Tools to Help Solve Moral Hazard in Debt Contracts........................................................... 178
Summary............................................................................................................................. 180

APPLICATION Financial Development and Economic Growth................................ 181

FYI The Tyranny of Collateral 182

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APPLICATION Is China a Counterexample to the Importance

of Financial Development?................................................................................ 183
Summary 184  •  Key Terms 185  •  Questions 185  •  Applied Problems 186  •  
Data Analysis Problems 187  •   Web Exercises 187  •   Web References 187

CHAPTER 9
Banking and the Management of Financial Institutions 188
The Bank Balance Sheet............................................................................................................. 188
Liabilities............................................................................................................................. 188
Assets.................................................................................................................................. 191
Basic Banking................................................................................................................................ 192
General Principles of Bank Management.............................................................................. 195
Liquidity Management and the Role of Reserves.................................................................. 195
Asset Management............................................................................................................... 198
Liability Management.......................................................................................................... 199
Capital Adequacy Management........................................................................................... 200

APPLICATION Strategies for Managing Bank Capital............................................... 202

APPLICATION How a Capital Crunch Caused a Credit Crunch During the

Global Financial Crisis...................................................................................... 203
Managing Credit Risk.................................................................................................................. 203
Screening and Monitoring................................................................................................... 204
Long-Term Customer Relationships..................................................................................... 205
Loan Commitments............................................................................................................. 206
Collateral and Compensating Balances................................................................................ 206
Credit Rationing.................................................................................................................. 206
Managing Interest-Rate Risk..................................................................................................... 207
Gap and Duration Analysis.................................................................................................. 208

APPLICATION Strategies for Managing Interest-Rate Risk........................................ 209

Off-Balance-Sheet Activities..................................................................................................... 209
Loan Sales........................................................................................................................... 210
Generation of Fee Income................................................................................................... 210
Trading Activities and Risk Management Techniques........................................................... 210

Global Barings, Daiwa, Sumitomo, Société Générale, and JP Morgan Chase:

Rogue Traders and the Principal–Agent Problem 211
Summary 212  •  Key Terms 213  •  Questions 213  •  Applied Problems 214  •  
Data Analysis Problems 215  •   Web Exercises 215  •   Web References 216

CHAPTER 9 APPENDIX 1
Duration Gap Analysis
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CHAPTER 9 APPENDIX 2
Measuring Bank Performance
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 xviii Contents in Detail

CHAPTER 10
Economic Analysis of Financial Regulation 217
Asymmetric Information as a Rationale for Financial Regulation.................................. 217
Government Safety Net....................................................................................................... 217

Global The Spread of Government Deposit Insurance Throughout the World:

Is This a Good Thing? 219
Drawbacks of the Government Safety Net........................................................................... 220
Types of Financial Regulation................................................................................................... 222
Restrictions on Asset Holdings............................................................................................ 222
Capital Requirements.......................................................................................................... 223

Global Where Is the Basel Accord Heading After the Global Financial Crisis? 224
Prompt Corrective Action.................................................................................................... 225
Financial Supervision: Chartering and Examination............................................................ 225
Assessment of Risk Management......................................................................................... 226
Disclosure Requirements..................................................................................................... 227
Consumer Protection........................................................................................................... 228
Restrictions on Competition................................................................................................ 228
Summary............................................................................................................................. 229

Global International Financial Regulation 230

Summary 232  •  Key Terms 233  •  Questions 233  •  Applied Problems 234  •  

Data Analysis Problems 234  •   Web Exercises 235  •   Web References 235

CHAPTER 10 APPENDIX 1
The 1980s Banking and Savings and Loan Crisis
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CHAPTER 10 APPENDIX 2
Banking Crises Throughout the World
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CHAPTER 11
Banking Industry: Structure and Competition 236
Historical Development of the Banking System.................................................................. 236
Multiple Regulatory Agencies.............................................................................................. 238
Financial Innovation and the Growth of the “Shadow Banking System”...................... 239
Responses to Changes in Demand Conditions: Interest-Rate Volatility................................. 240
Responses to Changes in Supply Conditions: Information Technology................................ 241
Securitization and the Shadow Banking System................................................................... 243
Avoidance of Existing Regulations....................................................................................... 245

FYI Bruce Bent and the Money Market Mutual Fund Panic of 2008 246
Financial Innovation and the Decline of Traditional Banking............................................... 247

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Structure of the U.S. Commercial Banking Industry........................................................... 250

Restrictions on Branching.................................................................................................... 252
Response to Branching Restrictions..................................................................................... 252
Bank Consolidation and Nationwide Banking..................................................................... 253
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994........................... 255
What Will the Structure of the U.S. Banking Industry Look Like in the Future?.................. 255
Global Comparison of Banking Structure in the United States and Abroad 256
Are Bank Consolidation and Nationwide Banking Good Things?......................................... 256
Separation of the Banking and Other Financial Service Industries................................ 257
Erosion of Glass-Steagall...................................................................................................... 257
The Gramm-Leach-Bliley Financial Services Modernization Act of 1999:
Repeal of Glass-Steagall.................................................................................................. 258
Implications for Financial Consolidation............................................................................. 258
Separation of Banking and Other Financial Services Industries Throughout the World....... 258
FYI The Global Financial Crisis and the Demise of Large,
Free-Standing Investment Banks 259
Thrift Industry: Regulation and Structure.............................................................................. 259
Savings and Loan Associations............................................................................................. 260
Mutual Savings Banks.......................................................................................................... 260
Credit Unions...................................................................................................................... 260
International Banking................................................................................................................. 261
Eurodollar Market............................................................................................................... 261
Global Ironic Birth of the Eurodollar Market 262
Structure of U.S. Banking Overseas...................................................................................... 262
Foreign Banks in the United States...................................................................................... 263
Summary 264  •   Key Terms 265  •   Questions 265  •   Data Analysis Problems 266  •  
Web Exercises 267  •   Web References 267

CHAPTER 12
Financial Crises 268
What Is a Financial Crisis?.......................................................................................................... 268
Dynamics of Financial Crises.................................................................................................... 269
Stage One: Initial Phase....................................................................................................... 269
Stage Two: Banking Crisis.................................................................................................... 271
Stage Three: Debt Deflation................................................................................................. 272
APPLICATION The Mother of All Financial Crises: The Great Depression.............. 273
Stock Market Crash............................................................................................................. 273
Bank Panics......................................................................................................................... 273
Continuing Decline in Stock Prices..................................................................................... 274
Debt Deflation..................................................................................................................... 274
International Dimensions.................................................................................................... 275
The Global Financial Crisis of 2007–2009............................................................................. 275
Causes of the 2007–2009 Financial Crisis........................................................................... 275
FYI Collateralized Debt Obligations (CDOs) 276
Effects of the 2007–2009 Financial Crisis............................................................................ 277

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Inside the Fed Was the Fed to Blame for the Housing Price Bubble? 278
Global The European Sovereign Debt Crisis 281
Height of the 2007–2009 Financial Crisis........................................................................... 282
Government Intervention and the Recovery........................................................................ 283

Global Worldwide Government Bailouts During the 2007–2009 Financial Crisis 283
Response of Financial Regulation............................................................................................ 284
Macroprudential Versus Microprudential Supervision......................................................... 284
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.............................. 285
Too-Big-to-Fail and Future Regulation.................................................................................. 286
What Can Be Done About the Too-Big-to-Fail Problem?...................................................... 287
Beyond Dodd-Frank: Where Might Regulation Head in the Future?.................................... 287

Summary 289  •   Key Terms 290  •   Questions 290  •   Data Analysis Problems 291  •  
Web Exercises 292  •   Web References 292

PART 4 Central Banking and the Conduct of Monetary Policy 293

CHAPTER 13
Central Banks and the Federal Reserve System 294
Origins of the Federal Reserve System................................................................................... 294
Inside the Fed The Political Genius of the Founders of the Federal Reserve System 295

Structure of the Federal Reserve System............................................................................... 295

Federal Reserve Banks......................................................................................................... 296

Inside the Fed The Special Role of the Federal Reserve Bank of New York 298
Member Banks.................................................................................................................... 299
Board of Governors of the Federal Reserve System............................................................... 300
Federal Open Market Committee (FOMC).......................................................................... 300

Inside the Fed The Role of the Research Staff 301

Inside the Fed The FOMC Meeting 302
Inside the Fed Green, Blue, Teal, and Beige: What Do These Colors
Mean at the Fed? 303
Why the Chairman of the Board of Governors Really Runs the Show.................................. 303

Inside the Fed Styles of Federal Reserve Chairs: Bernanke and Yellen
Versus Greenspan 304
How Independent Is the Fed?.................................................................................................. 305
Should the Fed Be Independent?............................................................................................ 307
The Case for Independence................................................................................................. 307
The Case Against Independence.......................................................................................... 308
Central Bank Independence and Macroeconomic Performance Throughout the World........ 309
Explaining Central Bank Behavior........................................................................................... 309
Inside the Fed The Evolution of the Fed’s Communication Strategy 310

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Structure and Independence of the European Central Bank.......................................... 311

Differences Between the European System of Central Banks and the
Federal Reserve System.................................................................................................. 311
Governing Council.............................................................................................................. 312
How Independent Is the ECB?............................................................................................. 312
Structure and Independence of Other Foreign Central Banks........................................ 313
Bank of Canada................................................................................................................... 313
Bank of England.................................................................................................................. 313
Bank of Japan...................................................................................................................... 314
The Trend Toward Greater Independence............................................................................ 315
Summary 315  •   Key Terms 316  •   Questions 316  •   Data Analysis Problems 317  •  
Web Exercises 317  •   Web References 317

CHAPTER 14
The Money Supply Process 318
Three Players in the Money Supply Process......................................................................... 318
The Fed’s Balance Sheet............................................................................................................. 318
Liabilities............................................................................................................................. 319
Assets.................................................................................................................................. 320
Control of the Monetary Base.................................................................................................. 320
Federal Reserve Open Market Operations............................................................................ 321
Shifts from Deposits into Currency...................................................................................... 322
Loans to Financial Institutions............................................................................................. 323
Other Factors That Affect the Monetary Base....................................................................... 323
Overview of the Fed’s Ability to Control the Monetary Base................................................. 324
Multiple Deposit Creation: A Simple Model........................................................................ 325
Deposit Creation: The Single Bank...................................................................................... 325
Deposit Creation: The Banking System................................................................................ 326
Deriving the Formula for Multiple Deposit Creation........................................................... 329
Critique of the Simple Model.............................................................................................. 330
Factors That Determine the Money Supply.......................................................................... 331
Changes in the Nonborrowed Monetary Base, MBn.............................................................. 331
Changes in Borrowed Reserves, BR, from the Fed................................................................ 331
Changes in the Required Reserve Ratio, rr........................................................................... 332
Changes in Excess Reserves................................................................................................. 332
Changes in Currency Holdings............................................................................................ 332
Overview of the Money Supply Process................................................................................ 332
The Money Multiplier................................................................................................................. 333
Deriving the Money Multiplier............................................................................................ 333
Intuition Behind the Money Multiplier................................................................................ 335
Money Supply Response to Changes in the Factors.............................................................. 336
APPLICATION Quantitative Easing and the Money Supply, 2007–2017................... 337
Summary 339  •  Key Terms 339  •  Questions 339  •  Applied Problems 340  •  
Data Analysis Problems 341  •   Web Exercises 341  •   Web References 342

CHAPTER 14 APPENDIX 1
The Fed’s Balance Sheet and the Monetary Base
Go to MyLab Economics, www.pearson.com/mylab/economics

A01_MISH3821_12_SE_FM.indd 21 01/11/17 12:45 PM

 xxii Contents in Detail

CHAPTER 14 APPENDIX 2
The M2 Money Multiplier
Go to MyLab Economics, www.pearson.com/mylab/economics

CHAPTER 14 APPENDIX 3
Explaining the Behavior of the Currency Ratio
Go to MyLab Economics, www.pearson.com/mylab/economics

CHAPTER 14 APPENDIX 4
The Great Depression Bank Panics, 1930–1933, and the Money Supply
Go to MyLab Economics, www.pearson.com/mylab/economics

CHAPTER 15
Tools of Monetary Policy 343
The Market for Reserves and the Federal Funds Rate....................................................... 343
Demand and Supply in the Market for Reserves.................................................................. 344
How Changes in the Tools of Monetary Policy Affect the Federal Funds Rate...................... 345

APPLICATION How the Federal Reserve’s Operating Procedures

Limit Fluctuations in the Federal Funds Rate................................................... 349
Conventional Monetary Policy Tools..................................................................................... 350
Open Market Operations..................................................................................................... 351

Inside the Fed A Day at the Trading Desk 352

Discount Policy and the Lender of Last Resort..................................................................... 353

Inside the Fed Using Discount Policy to Prevent a Financial Panic 355
Reserve Requirements.......................................................................................................... 356
Interest on Reserves............................................................................................................. 356
Relative Advantages of the Different Tools........................................................................... 357
Nonconventional Monetary Policy Tools and Quantitative Easing............................... 357
Liquidity Provision.............................................................................................................. 358
Large-Scale Asset Purchases................................................................................................. 358

Inside the Fed Fed Lending Facilities During the Global Financial Crisis 359
Quantitative Easing Versus Credit Easing............................................................................. 360
Forward Guidance............................................................................................................... 362
Negative Interest Rates on Banks’ Deposits.......................................................................... 363
Monetary Policy Tools of the European Central Bank....................................................... 364
Open Market Operations..................................................................................................... 364
Lending to Banks................................................................................................................. 364
Interest on Reserves............................................................................................................. 365
Reserve Requirements.......................................................................................................... 365

Summary 365  •  Key Terms 366  •  Questions 366  •  Applied Problems 367  •  

Data Analysis Problems 368  •   Web Exercises 368  •   Web References 368

A01_MISH3821_12_SE_FM.indd 22 01/11/17 12:45 PM

Another random document with
no related content on Scribd:
usaba de su cuerpo como pública
ramera, y otro autor que dixo que
Pan, dios de los pastores, fué hijo
suyo y de Mercurio, y que por
saber esto Ulises hizo divorcio
con ella y se fué á vivir á la ínsola
Cortina; y otros muchos que
hablando de su vida trataron della
como de mujer que había vivido
deshonestamente y que no
solamente tuvo por hijo al dios
Pan, sino á otros muchos de
diferentes padres, hechos en
adulterio; y si Virginea fué muerta
por no consentir en la
desenfrenada voluntad de aquel
varón de los diez que entonces
gobernaban á Roma, que por tan
exquisitas y desvergonzadas
formas y maneras procuraba
gozar el amor ilícito y deshonesto
que con ella tenía, fué porque su
padre hizo sacrificio de la hija por
no recebir la afrenta que viviendo
le estaba aparejada, que si á la
voluntad de Virginea lo dexaran,
por ventura excusara la muerte
con dexarse corromper su
honestidad antes que recebir las
puñaladas que le fueron dadas
por su padre; así que no estés,
Torcato, tan confiado de la tu
Belisia que no puedas presumir
que por haber puesto sus amores
y voluntad en otra persona haya
dexado los que contigo tenía,
porque esto es lo que yo por más
cierto tengo.
Torcato.—Y yo por más incierto,
porque no me podrás inducir con
tus enxemplos que pueda creerlo;
porque ya que fuese verdad lo
que has dicho, ¿cuántas mujeres
ha habido y hay en el mundo tan
castas que ninguna mancilla se
puede poner en su bondad? Y si
no mira lo que hizo la reina Dido
por no querer consentir en los
amores del rey Yarvas, ni que
después de la muerte de su
marido Sicheo hubiese quien
pudiesse triunfar de su
honestidad, y así escogió por
mejor dexar hacer ceniza su
cuerpo en el ardiente fuego que
no dar lugar á que otro ninguno
pudiese gozar de lo que él había
gozado; aunque el poeta Virgilio,
no sé por qué causa ó razón
inducido, quiso poner en su
bondad y buena fama la mancilla
que puso, diciendo que había
tenido amores con Eneas, siendo
falsedad averiguada, porque Dido
fué mucho tiempo antes que
Eneas, saliendo de Troya,
anduviesse peregrinando por el
mundo; y sin tratar de las mujeres
antiguas, ¿cuántas en nuestros
tiempos se sojuzgan al
incomparable trabajo de las
religiones, haciendo sacrificio de
la vida hasta la muerte, y otras
que han tenido por mejor que sus
cuerpos fueran despedazados
que no consentir en que por su
voluntad la castidad fuesse en
ellas violada? Sola Susana
bastaba para quitar las lenguas
de los maldicientes, viendo con
cuánta firmeza procuró guardarla
de aquellos viejos que procuraban
aprovecharse della, teniendo por
mejor ser por su falso testimonio
condenada á la muerte que
consentir en sus torpes desseos.
Y sin ésta, te podría decir otras
muchas que bastan en nuestros
tiempos á defenderse de la
importunidad de los hombres, sin
dexarse jamás vencer para que
su castidad corra peligro, ni ellas
se puedan dexar de llamar
mujeres castas; y para que mejor
entiendas la ventaja que en esto
hacen las mujeres á los hombres,
mira lo que se usa en muchas
partes y entre muchas naciones
de gentes idólatras, que en
muriendo los maridos se matan y
se entierran, ó se queman con
ellos, por su propia voluntad, y
mostrando muy gran
contentamiento en huir de los
peligros en que quedaría su
honestidad siendo viudas, y no
verás hombre ninguno que haga
lo mesmo aunque se le mueran
cien mujeres; y ten por cierto que
muchas habría en la christiandad
que seguirían esta mesma orden
si el temor de la perdición de sus
ánimas no se lo vedase.
Filonio.—En cargo te son las
mujeres, que assí quieres
defender contra la común opinión
de todo el mundo ser hechas de
otra differente condición y
costumbres de las que tienen y en
ellas se conocen; continuamente
todos cuantos han escrito, cuando
vienen á hablar en ellas, no hallan
palabras que basten á contar sus
vicios y torpezas; los libros están
llenos dello, y no solamente los
proffanos, pero también los de la
Sagrada Escriptura, y si no
pregúntalo á Salomón y verás con
cuán encarescidas palabras las
pone muchas veces del lodo,
tratándolas como ellas lo
merecen. Y en un libro que yo oí
una vez leer decía que la mujer
nunca era buena sino una vez en
la vida, y que ésta era la hora que
se moría, y que era mejor cuando
más presto se muriese; y con
estas palabras consolaba un
amigo á otro porque su mujer se
le había muerto.
Torcato.—Bastaría que alguna
mujer te hubiesse á ti tratado
como á mí me ha hecho Belisia
para que tanto mal me dixeses
della y de todas las otras mujeres;
pero no quiera Dios que yo con
pasión me ciegue para decirlo, ni
para consentir que tú pienses que
tienes razón en lo que dices. Y lo
primero que quiero preguntarte es
quiénes son esos que escribieron
los libros que has dicho.
Filonio.—¿Quiénes han de ser
sino hombres muy sabios y
avisados que las tienen bien
conocidas?
Torcato.—Bien se parece que
son hombres, que si fueran
mujeres harto más tuvieran que
poder decir y escribir y con mayor
verdad de los hombres que no los
hombres dellas, porque
verdaderamente muy mayores y
más torpes y más comunes son
los vicios en los hombres que en
las mujeres, y nosotros, que las
notamos y acusamos de parleras
y desenfrenadas en sus lenguas,
somos los que las infamamos
diciendo tantos males dellas, que
debríamos de tener vergüenza de
que nuestras palabras saliessen
por nuestras bocas tan
perjudiciales contra personas de
quien tantos bienes recebimos; y
aunque haya algunas malas entre
ellas, yo fiador que no sean tantas
como los hombres, y nosotros
mesmos somos la principal causa
de sus males, importunándolas y
fatigándolas con promesas, con
engaños, con lisonjas y con
persuasiones que bastarían á
mover las piedras, cuanto más á
mujeres, para que algunas veces
vengan á dar en algunos yerros; y
ellas jamás nos importunan ni
fatigan requiriéndonos, y
molestándonos con
desvergüenza, antes tienen por
mejor callando passar sus
trabajos, que no dar á entender lo
que por ventura con su flaqueza
les piden sus apetitos. Y los que
escribieron contra ellas no fué
contra las buenas, sino contra las
malas, y lo que dixeron de las
unas, siendo pocas, no se ha de
entender de las otras, que son
muchas; así que sería mejor que
todos nosotros nos empleásemos
en decir bien de quien tantos
bienes habemos recebido y
recebimos cada día, y no mal de
quien ninguno nos merece; y si
alguna nos diere causa, con
algunos desatinos, á que
podamos decir mal della, sea
particularmente para reñirla y
castigarla con palabras y obras,
siendo necessario, y no queramos
que paguen las justas por las
peccadoras y las que no tienen
culpa por las que merecen el
castigo; que lo que fuera desto se
hiciere ó dixere, será mal dicho y
mal hecho, y los vituperios y
infamias y deshonras quedarán
en aquellos que las dixeren,
queriendo por una mujer mala
hacer á todo el género de las
mujeres malas, siendo por la
mayor parte buenas y tan buenas
que plugiesse á Dios que no
fuéssemos nosotros peores que
ellas; y concluyendo digo que yo
no tengo la sospecha que dices
de que Belisia por haber tomado
amores con otro haya dexado los
míos, y primero lo habré visto por
los ojos que lo confirme en el
pensamiento.
Filonio.—Paréceme, Torcato,
que hablar alguna cosa en
perjuicio de Belisia es tocarte á ti
en el alma, y pues que con tanta
afición y tan apassionadamente
defiendes lo que le toca, yo no te
veo otro remedio para salir deste
piélago en que estás metido sino
esperar á que el tiempo vaya
consumiendo el agua poco á poco
hasta que te halles en seco, y
entonces juzgarás las cosas muy
diferentemente de lo que agora lo
haces.
Grisaldo.—Con estas pláticas se
nos ha pasado el día, y pues que
ya, Torcato, has descansado con
decirnos tu fatiga y nosotros
quedamos obligados á procurar tu
remedio y consuelo en todo lo
que pudiéremos hacerlo, aunque
sea contra tu parecer y voluntad,
procura de dexar la compañía de
la soledad con que andas, porque
con la conversación no tiene tanto
lugar la tristeza que sin sentirlo te
consumirá la vida, y agora todos
nos vamos al lugar, donde los
regocijos de las bodas de
Silveyda no serán aún acabados,
y podremos llegar á tiempo que
gocemos alguna parte dellos.
Torcato.—Haced lo que os
pareciere, que determinado estoy
á forzarme y seguir vuestro
consejo.
Filonio.—Pues ¡alto! ¡sus!
caminemos, y para que menos
sintamos el camino, vamos
cantando alguna cosa con que
tomemos placer, que, según veo,
bien será menester para que
Torcato deseche parte de la
tristeza con que anda.
Torcato.—Yo quiero comenzar
unos versos que hice en este
desierto, al propósito de lo que mi
corazón siente; vosotros me
ayudad, para que mejor pueda
cantarlos.
Grisaldo.—Comienza á decirlos,
que así lo haremos.

TODOS TRES PASTORES

Montes, sierras y collados,
que entendido
habéis mi pena rabiosa y mis
dolores,
escuchando mis fatigas y
querellas
que al alto cielo han subido,
rompiendo con mis clamores
las estrellas,
Doleos de mis trabajos y
fatiga;
llorad conmigo mis ansias y
mis males;
moveos á compasión de mi
tormento,
pues la dulce mi enemiga
quiere sean mortales
los que siento.
Los ríos desta montaña, con
las fuentes,
testigos de mis fatigas y
cuidados,
cansados ya de me ver con
mis enojos,
detengan hoy sus corrientes,
dando lágrimas parados
á mis ojos.
Tú, Eco, que estás contino
resonando,
de mis llantos grande amiga y
compañera,
llevando mis tristes voces por
los vientos,
no dexes de ir publicando
cómo me acusan, que muera
mis tormentos.
Y tú, mi ganado triste y
afligido,
con pastor tan sin ventura y
desdichado,
que alredor deste acebo
andas paciendo,
aquí te estarás tendido
tomando en ti mi cuidado,
y padesciendo.
Soledad muy agradable, y
compañía
á mis tristes pensamientos y
memoria,
con la cual siempre descansa
mi tristeza,
no dexes de ser mi guía,
porque sienta en ti su gloria
mi firmeza.
Belisia, si mis clamores han
herido
tus oídos, yo te ruego que
escucharlos
quieras con lástima alguna y
compasión
de verme tan afligido,
y no quieras ataparlos
sin razón.
Porque si no remediares mi
dolor,
á mí me basta que sepas que
padezco,
con entera libertad, y así lo
quiero,
con muy verdadero amor,
pues á la muerte me ofrezco
y por ti muero.

Fin.
Á LOOR Y HONRA DE SEÑOR JESUCHRISTO Y
DE SU BENDITA MADRE SANTA MARÍA,

NUESTRO AMPARO Y GUÍA, FUERON

IMPRESSOS LOS
SIETE COLLOQUIOS EN LA CIUDAD DE
MONDOÑEDO

EN CASA DE AGUSTÍN DE PAZ, IMPRESSOR

ACABÓSE Á XXV DÍAS DEL MES DE OCTUBRE

DEL AÑO
DE MDLIII
 NOTAS:
[1274] Remedio dice la edición de Mondoñedo, añadiendo una
sílaba al verso.

Tetuán de Chamartín.—Imp. de Bailly-Baillière é

hijos.
*** END OF THE PROJECT GUTENBERG EBOOK ORÍGENES DE
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received the work from. If you received the work on a physical
medium, you must return the medium with your written
explanation. The person or entity that provided you with the
defective work may elect to provide a replacement copy in lieu
of a refund. If you received the work electronically, the person or
entity providing it to you may choose to give you a second
opportunity to receive the work electronically in lieu of a refund.
If the second copy is also defective, you may demand a refund
in writing without further opportunities to fix the problem.

1.F.4. Except for the limited right of replacement or refund set

forth in paragraph 1.F.3, this work is provided to you ‘AS-IS’,
WITH NO OTHER WARRANTIES OF ANY KIND, EXPRESS