Money And Banking 1

Prof. Dr Gaber M. Abdel Gawad

2023-2024

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Money and Banking
Course Syllabus
 Authors of the book : Prof Dr Mohamed Abdel Wahed and Prof DR Mahmoud el
Tony
 Time of lecture :
 Instructor : Prof Dr Gaber abdel Gawad
 Place of Lecture:

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 table of contents

 Lecture 1: Introduction and the origin of money, and its evolution.

 Lecture 2: the Functions of Money and money supply
 Lecture 3 : Money supply and Price Level
 Lecture 4: The Commercial Bank ( assets and liabilities)
 Lecture 5: The Commercial Bank ( assets and liabilities)
 Lecture 6: Deposit money creation and its determinants …
 Lecture 7:The Central Bank
 Lecture 8:The Central Bank
 Lecture 9: Monetary policy and its effectiveness
 Lecture 10: Money Demand Theories
 Lecture 11: Financial markets
 Lecture 12: Financial markets
 Lecture 13: Financial markets
 Lecture 14: The General Equilibrium Model (IS-LM model)
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Money and Banking
Introduction

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Introduction

 Money and banking play crucial roles in modern economies. Money serves as a
medium of exchange, a unit of account, and a store of value. It facilitates the
exchange of goods and services by providing a widely accepted means of
payment. Banking, on the other hand, involves the financial intermediation
between savers and borrowers, ensuring the efficient allocation of resources
and the smooth functioning of the economy.
 Money can take various forms, including physical currencies like coins and
banknotes, as well as digital money such as bank deposits and electronic
payment systems. It represents a claim on goods and services and is backed
by the trust and confidence of individuals and institutions within an economy.

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Introduction

 Banking institutions, such as commercial banks, central banks, and other

financial intermediaries, play a vital role in the money and banking system.
Commercial banks accept deposits from individuals and businesses and
provide loans and credit to borrowers. They facilitate the payment system,
offer various financial services, and contribute to the overall stability of the
financial system.
 Central banks, on the other hand, are responsible for regulating and
overseeing the banking system, managing the money supply, and controlling
interest rates. They act as the lender of last resort, providing liquidity to
banks in times of financial stress. Central banks also play a crucial role in
maintaining price stability and achieving macroeconomic objectives.

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Introduction

 The interaction between money and banking has significant implications for
the broader economy. Monetary policy, conducted by central banks,
influences interest rates, inflation, and economic activity. Changes in the
money supply and credit availability impact investment, consumption, and
overall economic growth. The banking sector's stability and efficiency are
essential for maintaining confidence in the financial system and promoting
economic development.
 Understanding the principles of money and banking is crucial for individuals,
businesses, policymakers, and economists. It helps in making informed
financial decisions, formulating effective monetary policies, and
comprehending the dynamics of the economy as a whole.

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The Origin of Money, and Its Evolution

 The origin of money can be traced back to the early

stages of human civilization when barter systems were
prevalent. In a barter system, goods and services were
exchanged directly, without the use of a common
medium of exchange. However, barter systems had
limitations, such as the need for a double coincidence
of wants (finding someone who has what you want and
wants what you have) and the difficulty in
determining the relative value of different goods.
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The Origin of Money, and Its Evolution

 To overcome these limitations, various forms of money emerged throughout

history:
 1. Commodity Money: Commodity money refers to objects that have intrinsic
value and are widely accepted as a medium of exchange. Historically,
commodities such as seashells, beads, salt, and cattle have been used as
forms of money. The value of these commodities was based on their
usefulness or scarcity.
 2. Metallic Money: Precious metals like gold and silver gained popularity as
forms of money due to their durability, divisibility, and scarcity. They were
widely accepted and used in coinage. The value of metallic money was
determined by the metal content and quality.

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The Origin of Money, and Its Evolution

 3. Representative Money: With the growth of trade and the need for more
convenient forms of money, representative money emerged. This system
involved issuing certificates or notes that represented a claim on a specific
amount of precious metal stored with a trusted entity, such as a bank. These
notes could be exchanged for the underlying metal upon demand.
 4. Fiat Money: Fiat money is a form of currency that has value because a
government declares it as legal tender. It is not backed by a physical
commodity but relies on the trust and confidence of the people. Fiat money
has gained prominence globally, and most currencies today are fiat
currencies.

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The Origin of Money, and Its Evolution

 The evolution of money has also seen the transition from physical forms to
digital representations:
 1. Paper Money: Paper money, in the form of banknotes, became commonly
used as a more convenient alternative to carrying heavy metallic coins.
Banknotes were initially issued by private banks but later came under the
control of central banks.

 2. Electronic Money: The advent of electronic payment systems and the

development of banking infrastructure facilitated the transition to electronic
money. This includes digital representations of fiat currency in the form of
bank deposits and online payment methods.

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The Origin of Money, and Its Evolution

 3. Cryptocurrencies: In recent years, cryptocurrencies like Bitcoin have

emerged as decentralized digital currencies. They utilize cryptographic
techniques to secure transactions and control the creation of new units.
Cryptocurrencies operate independently of traditional banking systems and
have gained attention for their potential to disrupt traditional financial
systems.

 Overall, the evolution of money reflects the ongoing need for more efficient,
convenient, and trusted means of exchange. From barter systems to
commodity money, metallic money, representative money, and fiat money,
the concept of money has continually adapted to meet the requirements of
evolving economies and societies.

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The Origin of Money

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The Evolution of Money

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