The economics of money, banking, and financial markets

Cover......Page 1
Title Page......Page 6
Copyright Page......Page 7
About the Author......Page 10
Brief Contents......Page 12
Contents in Detail......Page 14
Preface......Page 40
Acknowledgments......Page 49
Part 1: Introduction......Page 54
  Why Study Financial Markets?......Page 55
   The Stock Market......Page 56
   Structure of the Financial System......Page 58
   Financial Crises......Page 59
   Money and Inflation......Page 60
   Conduct of Monetary Policy......Page 62
   Fiscal Policy and Monetary Policy......Page 63
  Why Study International Finance?......Page 64
   The Foreign Exchange Market......Page 65
   The International Financial System......Page 66
  How We Will Study Money, Banking, and Financial Markets......Page 67
  Summary......Page 68
  Questions......Page 69
  Data Analysis Problems......Page 70
  Web References......Page 71
   Real Versus Nominal Magnitudes......Page 72
   Aggregate Price Level......Page 73
   Growth Rates and the Inflation Rate......Page 74
  Function of Financial Markets......Page 75
   Primary and Secondary Markets......Page 78
   Exchanges and Over-the-Counter Markets......Page 79
   Money Market Instruments......Page 80
  Following the Financial News: Money Market Rates......Page 81
   Capital Market Instruments......Page 82
  Following the Financial News: Capital Market Interest Rates......Page 83
  Internationalization of Financial Markets......Page 84
   International Bond Market, Eurobonds, and Eurocurrencies......Page 85
  Function of Financial Intermediaries: Indirect Finance......Page 86
   Transaction Costs......Page 87
  Global: The Importance of Financial Intermediaries Relative to Securities Markets: An International Comparison......Page 88
   Asymmetric Information: Adverse Selection and Moral Hazard......Page 89
   Depository Institutions......Page 91
   Contractual Savings Institutions......Page 93
   Investment Intermediaries......Page 94
   Increasing Information Available to Investors......Page 95
   Ensuring the Soundness of Financial Intermediaries......Page 96
  Summary......Page 98
  Questions......Page 99
  Applied Problems......Page 100
  Web References......Page 101
  Meaning of Money......Page 102
   Medium of Exchange......Page 103
   Unit of Account......Page 104
   Store of Value......Page 105
   Checks......Page 106
   E-Money......Page 107
  Application: Will Bitcoin Become the Money of the Future?......Page 108
   The Federal Reserve’s Monetary Aggregates......Page 109
  Following the Financial News: The Monetary Aggregates......Page 110
  FYI: Where Are All the U.S. Dollars?......Page 111
  Summary......Page 112
  Questions......Page 113
  Applied Problems......Page 114
  Web References......Page 115
Part 2: Financial Markets......Page 116
   Present Value......Page 117
  Application: How Much Is That Jackpot Worth?......Page 119
   Four Types of Credit Market Instruments......Page 120
  Application: Yield to Maturity on a Simple Loan......Page 121
  Application: Yield to Maturity and the Yearly Payment on a Fixed-Payment Loan......Page 123
  Application: Yield to Maturity and the Bond Price for a Coupon Bond......Page 124
  Application: Yield to Maturity on a Perpetuity......Page 126
  Application: Yield to Maturity on a Discount Bond......Page 127
  The Distinction Between Interest Rates and Returns......Page 128
  Global: Negative Interest Rates? Japan First, Then the United States, Then Europe......Page 129
   Maturity and the Volatility of Bond Returns: Interest-Rate Risk......Page 131
   Summary......Page 132
  The Distinction Between Real and Nominal Interest Rates......Page 133
  Application: Calculating Real Interest Rates......Page 134
  Questions......Page 136
  Applied Problems......Page 137
  Web References......Page 138
  Determinants of Asset Demand......Page 139
   Risk......Page 140
   Theory of Portfolio Choice......Page 141
   Demand Curve......Page 142
   Supply Curve......Page 143
   Market Equilibrium......Page 144
  Changes in Equilibrium Interest Rates......Page 145
   Shifts in the Demand for Bonds......Page 146
   Shifts in the Supply of Bonds......Page 149
  Application: Changes in the Interest Rate Due to a Change in Expected Inflation: The Fisher Effect......Page 151
  Application: Changes in the Interest Rate Due to a Business Cycle Expansion......Page 153
  Application: Explaining Current Low Interest Rates in Europe, Japan, and the United States: Low Inflation and Secular Stagnation......Page 154
  Supply and Demand in the Market for Money: The Liquidity Preference Framework......Page 155
   Shifts in the Supply of Money......Page 158
  Application: Changes in the Equilibrium Interest Rate Due to Changes in Income, the Price Level, or the Money Supply......Page 159
   Changes in the Money Supply......Page 160
  Money and Interest Rates......Page 161
  Application: Does a Higher Rate of Growth of the Money Supply Lower Interest Rates?......Page 163
  Questions......Page 166
  Applied Problems......Page 167
  Data Analysis Problems......Page 168
  Web References......Page 169
   Default Risk......Page 170
  FYI: Conflicts of Interest at Credit-Rating Agencies and the Global Financial Crisis......Page 174
   Liquidity......Page 175
   Income Tax Considerations......Page 176
  Application: Effects of the Obama Tax Increase on Bond Interest Rates......Page 177
  Following the Financial News: Yield Curves......Page 178
   Expectations Theory......Page 180
   Segmented Markets Theory......Page 183
   Liquidity Premium and Preferred Habitat Theories......Page 184
   Evidence on the Term Structure......Page 187
  Application: Interpreting Yield Curves, 1980–2017......Page 188
  Questions......Page 190
  Data Analysis Problems......Page 192
  Web References......Page 193
  Computing the Price of Common Stock......Page 194
   The One-Period Valuation Model......Page 195
   The Gordon Growth Model......Page 196
  How the Market Sets Stock Prices......Page 197
  The Theory of Rational Expectations......Page 199
   Rationale Behind the Theory......Page 201
   Implications of the Theory......Page 202
  The Efficient Market Hypothesis: Rational Expectations in Financial Markets......Page 203
   Rationale Behind the Hypothesis......Page 204
   Random-Walk Behavior of Stock Prices......Page 205
   How Valuable Are Published Reports by Investment Advisers?......Page 206
   Should You Be Skeptical of Hot Tips?......Page 207
   Efficient Market Prescription for the Investor......Page 208
  Why the Efficient Market Hypothesis Does Not Imply That Financial Markets Are Efficient......Page 209
  Behavioral Finance......Page 210
  Summary......Page 211
  Questions......Page 212
  Applied Problems......Page 213
  Web References......Page 214
Part 3: Financial Institutions......Page 216
  Basic Facts About Financial Structure Throughout the World......Page 217
   How Transaction Costs Influence Financial Structure......Page 220
   How Financial Intermediaries Reduce Transaction Costs......Page 221
  The Lemons Problem: How Adverse Selection Influences Financial Structure......Page 222
   Tools to Help Solve Adverse Selection Problems......Page 223
  FYI: The Enron Implosion......Page 225
   Moral Hazard in Equity Contracts: The Principal–Agent Problem......Page 228
   Tools to Help Solve the Principal–Agent Problem......Page 229
   Tools to Help Solve Moral Hazard in Debt Contracts......Page 231
   Summary......Page 233
  Application: Financial Development and Economic Growth......Page 234
  FYI: The Tyranny of Collateral......Page 235
  Application: Is China a Counterexample to the Importance of Financial Development?......Page 236
  Summary......Page 237
  Questions......Page 238
  Applied Problems......Page 239
  Web References......Page 240
   Liabilities......Page 241
   Assets......Page 244
  Basic Banking......Page 245
   Liquidity Management and the Role of Reserves......Page 248
   Asset Management......Page 251
   Liability Management......Page 252
   Capital Adequacy Management......Page 253
  Application: Strategies for Managing Bank Capital......Page 255
  Managing Credit Risk......Page 256
   Screening and Monitoring......Page 257
   Long-Term Customer Relationships......Page 258
   Credit Rationing......Page 259
  Managing Interest-Rate Risk......Page 260
   Gap and Duration Analysis......Page 261
  Off-Balance-Sheet Activities......Page 262
   Trading Activities and Risk Management Techniques......Page 263
  Global: Barings, Daiwa, Sumitomo, Société Générale, and JP Morgan Chase: Rogue Traders and the Principal–Agent Problem......Page 264
  Summary......Page 265
  Questions......Page 266
  Applied Problems......Page 267
  Web Exercises......Page 268
  Web References......Page 269
   Government Safety Net......Page 270
  Global: The Spread of Government Deposit Insurance Throughout the World: Is This a Good Thing?......Page 272
   Drawbacks of the Government Safety Net......Page 273
   Restrictions on Asset Holdings......Page 275
   Capital Requirements......Page 276
  Global: Where Is the Basel Accord Heading After the Global Financial Crisis?......Page 277
   Financial Supervision: Chartering and Examination......Page 278
   Assessment of Risk Management......Page 279
   Disclosure Requirements......Page 280
   Restrictions on Competition......Page 281
   Summary......Page 282
  Global: International Financial Regulation......Page 283
  Summary......Page 285
  Questions......Page 286
  Data Analysis Problems......Page 287
  Web References......Page 288
  Historical Development of the Banking System......Page 289
   Multiple Regulatory Agencies......Page 291
  Financial Innovation and the Growth of the “Shadow Banking System”......Page 292
   Responses to Changes in Demand Conditions: Interest-Rate Volatility......Page 293
   Responses to Changes in Supply Conditions: Information Technology......Page 294
   Securitization and the Shadow Banking System......Page 296
   Avoidance of Existing Regulations......Page 298
  FYI: Bruce Bent and the Money Market Mutual Fund Panic of 2008......Page 299
   Financial Innovation and the Decline of Traditional Banking......Page 300
  Structure of the U.S. Commercial Banking Industry......Page 303
   Response to Branching Restrictions......Page 305
  Bank Consolidation and Nationwide Banking......Page 306
   What Will the Structure of the U.S. Banking Industry Look Like in the Future?......Page 308
   Are Bank Consolidation and Nationwide Banking Good Things?......Page 309
   Erosion of Glass-Steagall......Page 310
   Separation of Banking and Other Financial Services Industries Throughout the World......Page 311
  Thrift Industry: Regulation and Structure......Page 312
   Credit Unions......Page 313
   Eurodollar Market......Page 314
   Structure of U.S. Banking Overseas......Page 315
   Foreign Banks in the United States......Page 316
  Summary......Page 317
  Questions......Page 318
  Data Analysis Problems......Page 319
  Web References......Page 320
  What Is a Financial Crisis?......Page 321
   Stage One: Initial Phase......Page 322
   Stage Two: Banking Crisis......Page 324
   Stage Three: Debt Deflation......Page 325
   Bank Panics......Page 326
   Debt Deflation......Page 327
   Causes of the 2007–2009 Financial Crisis......Page 328
  FYI: Collateralized Debt Obligations (CDOs)......Page 329
   Effects of the 2007–2009 Financial Crisis......Page 330
  Inside the Fed: Was the Fed to Blame for the Housing Price Bubble?......Page 331
  Global: The European Sovereign Debt Crisis......Page 334
   Height of the 2007–2009 Financial Crisis......Page 335
  Global: Worldwide Government Bailouts During the 2007–2009 Financial Crisis......Page 336
   Macroprudential Versus Microprudential Supervision......Page 337
   Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010......Page 338
  Too-Big-to-Fail and Future Regulation......Page 339
   Beyond Dodd-Frank: Where Might Regulation Head in the Future?......Page 340
  Summary......Page 342
  Questions......Page 343
  Data Analysis Problems......Page 344
  Web References......Page 345
   Life Insurance......Page 346
   Property and Casualty Insurance......Page 347
   Credit Insurance......Page 349
  FYI: The AIG Blowup......Page 350
  Application: Insurance Management......Page 351
   Restrictive Provisions......Page 352
   Limits on the Amount of Insurance......Page 353
  Pension Funds......Page 354
   Public Pension Plans......Page 355
  FYI: Should Social Security Be Privatized?......Page 356
  Finance Companies......Page 357
   Investment Banking......Page 358
   Organized Exchanges......Page 359
  Mutual Funds......Page 360
  FYI: Sovereign Wealth Funds: Are They a Danger?......Page 361
  Hedge Funds......Page 362
  Private Equity and Venture Capital Funds......Page 363
   Federal Credit Agencies......Page 364
  FYI: The Global Financial Crisis and the Bailout of Fannie Mae and Freddie Mac......Page 365
  Summary......Page 366
  Questions......Page 367
  Data Analysis Problems......Page 368
  Web References......Page 369
  Hedging......Page 370
  Application: Hedging with Interest-Rate Forward Contracts......Page 371
   Pros and Cons of Forward Contracts......Page 372
  Financial Futures Contracts and Markets......Page 373
  Application: Hedging with Financial Futures......Page 374
   Organization of Trading in Financial Futures Markets......Page 376
   Explaining the Success of Futures Markets......Page 377
   Hedging Foreign Exchange Risk with Futures Contracts......Page 379
  Options......Page 380
   Profits and Losses on Option and Futures Contracts......Page 381
  Application: Hedging with Future Options......Page 384
   Factors Affecting Option Premiums......Page 385
   Summary......Page 386
   Interest-Rate Swap Contracts......Page 387
   Advantages of Interest-Rate Swaps......Page 388
  Credit Derivatives......Page 389
   Credit Swaps......Page 390
  Application: Lessons from the Global Financial Crisis: When Are Financial Derivatives Likely to Be a Worldwide Ticking Time Bomb?......Page 391
  Key Terms......Page 393
  Applied Problems......Page 394
  Data Analysis Problems......Page 395
  Web References......Page 396
 Chapter 15: Conflicts of Interest in the Financial Industry......Page 397
  Ethics and Conflicts of Interest......Page 398
   Underwriting and Research in Investment Banking......Page 399
   Credit Assessment and Consulting in Credit-Rating Agencies......Page 400
   Universal Banking......Page 401
  FYI: Why Do Issuers of Securities Pay to Have Their Securities Rated?......Page 402
  Can the Market Limit Exploitation of Conflicts of Interest?......Page 403
  What Has Been Done to Remedy Conflicts of Interest?......Page 405
   Global: Legal Settlement of 2002......Page 406
  A Framework for Evaluating Policies to Remedy Conflicts of Interest......Page 407
   Approaches to Remedying Conflicts of Interest......Page 408
  Application: Evaluating Sarbanes-Oxley, the Global Legal Settlement, and the Dodd-Frank Bill......Page 410
  Summary......Page 412
  Questions......Page 413
  Web References......Page 414
Part 4: Central Banking and the Conduct of Monetary Policy......Page 416
  Origins of the Federal Reserve System......Page 417
  Structure of the Federal Reserve System......Page 418
   Federal Reserve Banks......Page 419
  Inside the Fed: The Special Role of the Federal Reserve Bank of New York......Page 421
   Member Banks......Page 422
   Federal Open Market Committee (FOMC)......Page 423
  Inside the Fed: The Role of the Research Staff......Page 424
  Inside the Fed: The FOMC Meeting......Page 425
   Why the Chair of the Board of Governors Really Runs the Show......Page 426
  Inside the Fed: Styles of Federal Reserve Chairs: Bernanke and Yellen Versus Greenspan......Page 427
  How Independent Is the Fed?......Page 428
   The Case for Independence......Page 430
   The Case Against Independence......Page 431
  Explaining Central Bank Behavior......Page 432
  Inside the Fed: The Evolution of the Fed’s Communication Strategy......Page 433
   Differences Between the European System of Central Banks and the Federal Reserve System......Page 434
   How Independent Is the ECB?......Page 435
   Bank of England......Page 436
   Bank of Japan......Page 437
  Summary......Page 438
  Questions......Page 439
  Web References......Page 440
  The Fed’s Balance Sheet......Page 441
   Liabilities......Page 442
  Control of the Monetary Base......Page 443
   Federal Reserve Open Market Operations......Page 444
   Shifts from Deposits into Currency......Page 445
   Other Factors That Affect the Monetary Base......Page 446
   Overview of the Fed’s Ability to Control the Monetary Base......Page 447
   Deposit Creation: The Single Bank......Page 448
   Deposit Creation: The Banking System......Page 449
   Deriving the Formula for Multiple Deposit Creation......Page 452
   Critique of the Simple Model......Page 453
   Changes in Borrowed Reserves, BR, from the Fed......Page 454
  Overview of the Money Supply Process......Page 455
   Deriving the Money Multiplier......Page 456
   Intuition Behind the Money Multiplier......Page 458
   Money Supply Response to Changes in the Factors......Page 459
  Application: Quantitative Easing and the Money Supply, 2007–2017......Page 460
  Questions......Page 462
  Applied Problems......Page 463
  Web Exercises......Page 464
  Web References......Page 465
  The Market for Reserves and the Federal Funds Rate......Page 466
   Demand and Supply in the Market for Reserves......Page 467
   How Changes in the Tools of Monetary Policy Affect the Federal Funds Rate......Page 468
  Application: How the Federal Reserve’s Operating Procedures Limit Fluctuations in the Federal Funds Rate......Page 472
  Conventional Monetary Policy Tools......Page 473
   Open Market Operations......Page 474
  Inside the Fed: A Day at the Trading Desk......Page 475
   Discount Policy and the Lender of Last Resort......Page 476
  Inside the Fed: Using Discount Policy to Prevent a Financial Panic......Page 478
   Interest on Reserves......Page 479
  Nonconventional Monetary Policy Tools and Quantitative Easing......Page 480
   Large-Scale Asset Purchases......Page 481
  Inside the Fed: Fed Lending Facilities During the Global Financial Crisis......Page 482
   Quantitative Easing Versus Credit Easing......Page 483
   Forward Guidance......Page 485
   Negative Interest Rates on Banks’ Deposits......Page 486
   Lending to Banks......Page 487
  Summary......Page 488
  Questions......Page 489
  Applied Problems......Page 490
  Web References......Page 491
  The Price Stability Goal and the Nominal Anchor......Page 492
   The Time-Inconsistency Problem......Page 493
   High Employment and Output Stability......Page 494
   Interest-Rate Stability......Page 495
   Hierarchical Versus Dual Mandates......Page 496
  Inflation Targeting......Page 497
   Inflation Targeting in New Zealand, Canada, and the United Kingdom......Page 498
   Advantages of Inflation Targeting......Page 500
   Disadvantages of Inflation Targeting......Page 502
   The Fed’s “Just Do It” Monetary Policy Strategy......Page 503
   The Long Road to Inflation Targeting......Page 505
  Global: The European Central Bank’s Monetary Policy Strategy......Page 506
  Lessons for Monetary Policy Strategy from the Global Financial Crisis......Page 507
   Implications for Inflation Targeting......Page 508
   Two Types of Asset-Price Bubbles......Page 509
   The Debate over Whether Central Banks Should Try to Pop Bubbles......Page 510
  Tactics: Choosing the Policy Instrument......Page 513
   Criteria for Choosing the Policy Instrument......Page 515
  Tactics: The Taylor Rule......Page 516
  Inside the Fed: Fed Watchers......Page 519
  Key Terms......Page 520
  Questions......Page 521
  Data Analysis Problems......Page 522
  Web Exercises......Page 523
  Web References......Page 524
Part 5: International Finance and Monetary Policy......Page 526
  Foreign Exchange Market......Page 527
   Why Are Exchange Rates Important?......Page 528
   How Is Foreign Exchange Traded?......Page 529
   Theory of Purchasing Power Parity......Page 530
  Application: Burgernomics: Big Macs and PPP......Page 532
   Factors That Affect Exchange Rates in the Long Run......Page 534
   Demand Curve for Domestic Assets......Page 536
   Shifts in the Demand for Domestic Assets......Page 538
   Recap: Factors That Change the Exchange Rate......Page 541
  Application: Effects of Changes in Interest Rates on the Equilibrium Exchange Rate......Page 543
  Application: The Global Financial Crisis and the Dollar......Page 545
  Application: Brexit and the British Pound......Page 546
  Summary......Page 547
  Questions......Page 548
  Data Analysis Problems......Page 549
  Web References......Page 550
   Comparing Expected Returns on Domestic and Foreign Assets......Page 551
   Interest Parity Condition......Page 553
   Foreign Exchange Intervention and the Money Supply......Page 555
  Inside the Fed: A Day at the Federal Reserve Bank of New York’s Foreign Exchange Desk......Page 556
   Unsterilized Intervention......Page 558
  Balance of Payments......Page 559
   Financial Account......Page 560
  Exchange Rate Regimes in the International Financial System......Page 561
   The Bretton Woods System......Page 562
   How a Fixed Exchange Rate Regime Works......Page 563
  Application: The Foreign Exchange Crisis of September 1992......Page 565
   The Policy Trilemma......Page 567
   Monetary Unions......Page 568
  Global: Will the Euro Survive?......Page 569
   Controls on Capital Inflows......Page 570
   Should the IMF Act as an International Lender of Last Resort?......Page 571
   Direct Effects of the Foreign Exchange Market on Monetary Policy......Page 572
   Advantages of Exchange-Rate Targeting......Page 573
   Disadvantages of Exchange-Rate Targeting......Page 574
   When Is Exchange-Rate Targeting Desirable for Industrialized Countries?......Page 576
   Currency Boards......Page 577
   Dollarization......Page 578
  Summary......Page 579
  Questions......Page 580
  Applied Problems......Page 581
  Data Analysis Problems......Page 582
  Web References......Page 583
Part 6: Monetary Theory......Page 584
   Velocity of Money and Equation of Exchange......Page 585
   From the Equation of Exchange to the Quantity Theory of Money......Page 587
   Quantity Theory and Inflation......Page 588
  Application: Testing the Quantity Theory of Money......Page 589
   Government Budget Constraint......Page 591
  Application: The Zimbabwean Hyperinflation......Page 593
   Putting the Three Motives Together......Page 594
  Portfolio Theories of Money Demand......Page 595
   Other Factors That Affect the Demand for Money......Page 596
   Interest Rates and Money Demand......Page 597
   Stability of Money Demand......Page 598
  Questions......Page 599
  Data Analysis Problems......Page 601
  Web References......Page 602
  Aggregate Demand......Page 603
   Deriving the Aggregate Demand Curve......Page 604
   Factors That Shift the Aggregate Demand Curve......Page 605
  FYI: What Does Autonomous Mean?......Page 606
   Short-Run Aggregate Supply Curve......Page 609
   Shifts in the Long-Run Aggregate Supply Curve......Page 611
   Shifts in the Short-Run Aggregate Supply Curve......Page 612
  Equilibrium in Aggregate Demand and Supply Analysis......Page 615
   How the Short-Run Equilibrium Moves to the Long-Run Equilibrium over Time......Page 616
  Changes in Equilibrium: Aggregate Demand Shocks......Page 619
  Application: The Volcker Disinflation, 1980–1986......Page 620
   Temporary Supply Shocks......Page 622
   Permanent Supply Shocks and Real Business Cycle Theory......Page 625
  Application: Positive Supply Shocks, 1995–1999......Page 628
   Conclusions......Page 629
  AD/AS Analysis of Foreign Business Cycle Episodes......Page 630
  Application: The United Kingdom and the 2007–2009 Financial Crisis......Page 632
  Application: China and the 2007–2009 Financial Crisis......Page 633
  Summary......Page 634
  Questions......Page 635
  Data Analysis Problems......Page 636
  Web References......Page 637
    Phillips Curve Analysis in the 1960s......Page 638
    The Friedman-Phelps Phillips Curve Analysis......Page 640
    The Modern Phillips Curve......Page 642
    The Modern Phillips Curve with Adaptive (Backward-Looking) Expectations......Page 643
   The Short-Run Aggregate Supply Curve......Page 644
  Response of Monetary Policy to Shocks......Page 647
   Response to an Aggregate Demand Shock......Page 648
   Response to a Permanent Supply Shock......Page 650
   Response to a Temporary Supply Shock......Page 652
   Lags and Policy Implementation......Page 655
  Inflation: Always and Everywhere a Monetary Phenomenon......Page 656
   High Employment Targets and Inflation......Page 657
  Application: The Great Inflation......Page 661
   Deriving the Aggregate Demand Curve with the Zero Lower Bound......Page 663
   The Disappearance of the Self-Correcting Mechanism at the Zero Lower Bound......Page 665
  Application: Nonconventional Monetary Policy and Quantitative Easing......Page 666
   Liquidity Provision......Page 667
   Asset Purchases and Quantitative Easing......Page 668
   Management of Expectations......Page 669
  Application: Abenomics and the Shift in Japanese Monetary Policy in 2013......Page 670
  Key Terms......Page 672
  Questions......Page 673
  Data Analysis Problems......Page 674
  Web References......Page 675
  Transmission Mechanisms of Monetary Policy......Page 676
   Traditional Interest-Rate Channels......Page 677
   Other Asset Price Channels......Page 678
   Credit View......Page 681
  FYI: Consumers’ Balance Sheets and the Great Depression......Page 683
   Why Are Credit Channels Likely to Be Important?......Page 684
  Lessons for Monetary Policy......Page 685
  Application: Applying the Monetary Policy Lessons to Japan’s Two Lost Decades......Page 687
  Questions......Page 688
  Applied Problems......Page 689
  Web References......Page 690
Glossary......Page 692
Index......Page 704