Unit convenor and teaching staff |
Unit convenor and teaching staff
Lecturer
Jeff Oughton
Contact via Email
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Credit points |
Credit points
2
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Prerequisites |
Prerequisites
(Admission to MAppFin or MAppFin(Adv) or GradDipAppFin or GradCertPost-MAppFin) and (AFCP801 or ECFS865)
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Corequisites |
Corequisites
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Co-badged status |
Co-badged status
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Unit description |
Unit description
The aim of this unit is to provide a greater understanding of the role and interaction of economic factors with the financial sector. We utilise topical developments and issues as subject matter.
This unit explores the structure and growth of the economy, the determination of interest rates, exchange rates and equity prices, the role of finance, the changing importance of banks, institutional investors and security markets, and the economics of regulation with focus on the Global Financial Crisis and to a lesser extent the Asian Crisis. We also look at topical issues in economics and financial markets, for example the implications of the surge in Government debt, the implications for markets of an ageing population.
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Information about important academic dates including deadlines for withdrawing from units are available at https://www.mq.edu.au/study/calendar-of-dates
On successful completion of this unit, you will be able to:
To pass this unit (requires a Mark of 50 or better) the student must pass the final examination.
Name | Weighting | Hurdle | Due |
---|---|---|---|
Pre-unit Assignment | 10% | No | In First Class |
Assignment | 30% | No | Refer to iLearn |
Final Exam | 60% | Yes | Refer to Timetable |
Due: In First Class
Weighting: 10%
Summary of Assessment Task
Individual / Group: Individual.
Due Date: In first class.
Grading Method: Refer to 'Standards Required to Complete the Unit Satisfactorily' section.
Submission Method: In Class.
Duration: Refer to Assignment Coversheet.
Extension Requests:
Other Information:
Due: Refer to iLearn
Weighting: 30%
Summary of Assessment Task
Individual / Group: Individual.
Due Date: Refer to the unit's iLearn site.
Grading Method: Refer to 'Standards Required to Complete the Unit Satisfactorily' section.
Submission Method: Online via Turnitin on iLearn.
Duration: Refer to Assignment Coversheet.
Extension Requests:
Other Information: Unit assignment is handed out in lectures. Students choose a topical issue of interest to research and analyse the economic and financial implications of the topic using the concepts covered in class and the related unit material.
Due: Refer to Timetable
Weighting: 60%
This is a hurdle assessment task (see assessment policy for more information on hurdle assessment tasks)
Summary of Assessment Task
Individual / Group: Individual.
Due Date: Refer to Timetable.
Grading Method: Refer to 'Standards Required to Complete the Unit Satisfactorily' section.
Submission Method: As per MAFC Program Rules at www.mafc.mq.edu.au
Duration: 2 hours plus 10 minutes reading time.
Examination Conditions:
Extension Requests:
Face-to-Face Teaching: Generally 20 hours over 4 days.
Timetable: Detailed timetable for classes are on the Centre’s website www.mafc.mq.edu.au
Consultation Times:
Students who wish to contact any of the teaching staff may do so through:
Text: Nil.
Additional Readings:
Lecture Notes: Available in printed form and electronically via iLearn.
Pre-unit Materials: Information papers on statistics, regression, accounting and other material may be found at http://mafcstudents.mq.edu.au/new-to-mafc/pre-course-materials/. All students should work through this material prior to commencing the degree. The material will remain a useful reference as students progress through the program.
Calculators:
Assumed Knowledge:
Assumed Access:
Unit iLearn Site:
Important Notice:
TOPIC 1: INTRODUCTION AND OVERVIEW OF THE ECONOMY
The objective of this lecture is to introduce economic concepts important to the understanding of developments in financial markets and more broadly the financial system. The focus is on current relevance and the ability to analysis current economic and financial market issues.
Outline:
• Introduction and overview of the course
• Why does economics and finance matter?
• Measuring economic and financial systems
• Potential and actual growth of the economy
• Consumer and asset inflation/deflation
• Balance of payments and the international economy
• Business cycles – ups & down in economic activity
• Gauging and forecasting the economy
Application of Concepts:
• Objectives for managing the economy and the financial system
• Assessment of aggregate output, incomes, assets and liabilities & sustainability
• Wealth, debt and income effects
• Promotion of inflation targeting and external and internal balance
• Understanding key drivers of economic activity and its financial linkages
Readings:
TOPIC 2: MACROECONOMIC AND FINANCIAL POLICIES
The objective of this lecture is to examine the use of some of the instruments of economic policy and how they affect closely related financial market prices and more generally, the stability of the financial system.
Outline:
• The goals of economic policy
• Interest rates
• Exchange rates
• Fiscal policy
• Monetary policy
• Macro prudential policy
• Structural policy and reform
• International economic policy & the global monetary system
Application of Concepts:
• The role of policymakers in macroeconomic and financial stabilisation
• Fiscal policy – effectiveness and sustainability?
• Monetary policy decisions: what next?
• What are the impacts of QE on financial assets?
• Inflation targeting: goods and services prices only or asset prices too?
• How does macroprudential policy help to safeguard the whole financial system?
• Currency unions and exchange rate regimes - fixed, floating or common?
• China’s exchange rate: appreciation or stability?
• The Reserve Currency Debate & Rebalancing Global Growth
• Bitcoin and e-currencies
Readings:
Handouts for in class Shadow Central Bank Meeting - Latest RBA and other central bank policy statements & announcements.
Readings for pre-course assignment:
• Dr Donald T. Brash, then Governor, Reserve Bank of New Zealand, “The Pros and Cons of Currency Union: A Reserve Bank Perspective”. 22 May 2000 - http://www.rbnz.govt.nz/speeches/0091114.html
• Benoit Coeure, ECB Board Member, “The Future of Europe”, December 2013 - https://www.bis.org/review/r131206c.pdf
• Mojmir Hampi: To be or not to be in the Eurozone? An answer from Prague, May 2018 - https://www.bis.org/review/r180531a.pdf
TOPIC 3: FINANCE IN THE ECONOMY
The objective of this lecture is to examine the role of finance in the economy, why countries differ in the financial structure that has developed and why this structure has an economic impact.
Copies of the PowerPoint slides used in the lecture will be available.
Outline:
• Role of finance in the economy: asymmetric information and the costs of information and transactions as drivers of financial development
• Savings and investment – further insights in economic and financial activity
• Intermediation and disintermediation
• Financial Accounts – an accounting framework for the financial system
• Financial sector structure and economic development
Application of Concepts:
• Are financial intermediaries and capital markets alternatives or complementary? Good or bad?
• What companies are likely to use intermediated bank finance rather than disintermediated financial instruments in capital markets? And why?
• What are the major influences on financial structure?
• What causes procyclicality and instability in the banking and financial system?
• How to avoid and manage financial crises?
Readings:
• Christopher Kent. Assistant Governor RBA, “The Availability of Business Finance” https://www.rba.gov.au/speeches/2017/sp-ag-2017-12-13.html
• KPMG, et al Fintech 100 – Presenting the world’s leading fintech innovators for 2017 https://h2.vc/reports/fintechinnovators/2017 - skim for examples of emerging innovative financial product and services providers
• Jean-Claude Trichet, President of the European Central Bank, “What role for finance?” at the Universidade Nova de Lisboa, Lisbon, 6 May 2010 - http://www.bis.org/review/ r100510a.pdf
• Mark Carney, Governor of the Bank of England, A Transition in Thinking and Action, April 2018 - https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/a-transition-in-thinking-and-action-speech-by-mark-carney.pdf - climate finance and risk management is moving into the mainstream – greening finance
In Class Discussion:
• Research and Statistics Department “Flow of Funds (1st Quarter 2016) – Japan, US and
Euro area Overview” Bank of Japan - http://www.boj.or.jp/en/statistics/sj/sjhiq.pdf
TOPIC 4. ECONOMICS OF SECURITIES MARKETS
The objective of this lecture is to build some of the drivers of primary and secondary markets for securities and their derivatives, including exploring some valuation issues from an economics perspective.
Copies of the PowerPoint slides used in the lecture will be available.
Outline:
• Effective demand and supply
• Supply-side and demand-side factors for securities
• Judging effectiveness – efficiency and inefficiency in the foreign exchange, bond and equity markets
• Alternative valuation approaches and their uses
Application of Concepts:
• What are the key drivers of long-term government bond yields?
• What are the signs investors to judge the limit of excessive Government borrowing?
• The calculation and relevance of Tobin’s q and Shiller’s p/e ratios
• Short term vs. long-term volatility and returns?
• Are bubbles inevitable and impossible to deflate without a crisis?
Readings:
TOPIC 5. ECONOMICS OF FINANCIAL REGULATION
The objective of this lecture is to explore the rationale for regulation of the financial sector – notably both markets and banking and financial service providers - and how regulatory power can be best used to achieve desired outcomes.
Apart from the lecture notes, in class discussion will focus on the causes of the US subprime crisis and subsequent Global Financial Crisis and the lessons learned for financial supervisors, bankers, portfolio managers and other stakeholders.
Copies of the PowerPoint slides used in the lecture will be available.
Outline:
• Economic rationale for regulation
• Cost of regulation
• Regulation and financial innovation
• Lessons from the US sub-prime mortgage market and the GFC
• Lessons from the Asian crisis
• Lessons from the European Sovereign crisis
Application of Concepts:
Readings:
Post course readings:
Executive Summary - http://www.imf.org/external/pubs/ft/gfsr/index.htm
Macquarie University policies and procedures are accessible from Policy Central (https://staff.mq.edu.au/work/strategy-planning-and-governance/university-policies-and-procedures/policy-central). Students should be aware of the following policies in particular with regard to Learning and Teaching:
Undergraduate students seeking more policy resources can visit the Student Policy Gateway (https://students.mq.edu.au/support/study/student-policy-gateway). It is your one-stop-shop for the key policies you need to know about throughout your undergraduate student journey.
If you would like to see all the policies relevant to Learning and Teaching visit Policy Central (https://staff.mq.edu.au/work/strategy-planning-and-governance/university-policies-and-procedures/policy-central).
Macquarie University students have a responsibility to be familiar with the Student Code of Conduct: https://students.mq.edu.au/study/getting-started/student-conduct
Results shown in iLearn, or released directly by your Unit Convenor, are not confirmed as they are subject to final approval by the University. Once approved, final results will be sent to your student email address and will be made available in eStudent. For more information visit ask.mq.edu.au.
Students should also consult the MAFC Program Rules found at http://www.mafc.mq.edu.au
Macquarie University provides a range of support services for students. For details, visit http://students.mq.edu.au/support/
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For all student enquiries, please contact studentsupport@mafc.mq.edu.au
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Our postgraduates will demonstrate a high standard of discernment and common sense in their professional and personal judgment. They will have the ability to make informed choices and decisions that reflect both the nature of their professional work and their personal perspectives.
This graduate capability is supported by:
Our postgraduates will be capable of utilising and reflecting on prior knowledge and experience, of applying higher level critical thinking skills, and of integrating and synthesising learning and knowledge from a range of sources and environments. A characteristic of this form of thinking is the generation of new, professionally oriented knowledge through personal or group-based critique of practice and theory.
This graduate capability is supported by:
Our postgraduates will be capable of systematic enquiry; able to use research skills to create new knowledge that can be applied to real world issues, or contribute to a field of study or practice to enhance society. They will be capable of creative questioning, problem finding and problem solving.
This graduate capability is supported by:
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This graduate capability is supported by:
This Unit Guide may be subject to change. The latest version is on the Centre’s website at www.mafc.mq.edu.au.
Students should read the Unit Guide carefully at the start of term. It contains important information about the unit. If anything is unclear, please consult one of the unit lecturers.
University Policy on Grading:
Specific Unit Grading:
Grade | Expectation |
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High Distinction | Provides consistent evidence of deep and critical understanding in relation to the learning outcomes. There is substantial originality and insight in identifying, generating and communicating competing arguments, perspectives or problem solving approaches; critical evaluation of problems, their solutions and their implications; creativity in application as appropriate to the discipline. |
Distinction | Provides evidence of integration and evaluation of critical ideas, principles and theories, distinctive insight and ability in applying relevant skills and concepts in relation to learning outcomes. There is demonstration of frequent originality in defining and analysing issues or problems and providing solutions; and the use of means of communication appropriate to the discipline and the audience. |
Credit | Provides evidence of learning that goes beyond replication of content knowledge or skills relevant to the learning outcomes. There is demonstration of substantial understanding of fundamental concepts in the field of study and the ability to apply these concepts in a variety of contexts; convincing argumentation with appropriate coherent justification; communication of ideas fluently and clearly in terms of the conventions of the discipline. |
Pass | Provides sufficient evidence of the achievement of learning outcomes. There is demonstration of understanding and application of fundamental concepts of the field of study; routine argumentation with acceptable justification; communication of information and ideas adequately in terms of the conventions of the discipline. The learning attainment is considered satisfactory or adequate or competent or capable in relation to the specified outcomes. |
Fail | Does not provide evidence of attainment of learning outcomes. There is missing or partial or superficial or faulty understanding and application of the fundamental concepts in the field of study; missing, undeveloped, inappropriate or confusing argumentation; incomplete, confusing or lacking communication of ideas in ways that give little attention to the conventions of the discipline. |
Fail Hurdle | Student has obtained a raw mark over 50, yet failed all available attempts of at least one hurdle assessment. |
Review of Grade and final examination Script viewing: