Department of Economics

Department of Economics

Penn State University

Course Syllabus

Fall 2011

Economics 351

Money and Banking

Section 002

101 Ag Sc & Ind Bldg

Tues and Thurs 4:15 pm – 5:30 pm

Instructor: Dr. Russell P. Chuderewicz

Office: 506 Kern Graduate Building

Phone: 863-2156

Email:

Home Page http://grizzly.la.psu.edu/~rxc122/

Username: ecochud

Password: wildflower

(note: user name and password are case sensitive)

Office Hours: Wednesdays 3 – 5 pm and Thursdays 3- 4 pm and by appointment.

Required Material

Customized Material for Chuderewicz’s Econ 351 class – a separate packet of over 100 pages with three holes pre-punched (ready for a 3 ring binder). We will be following this packet quite closely!

Textbook: The Economics of Money, Banking, and Financial Markets, by Frederic S. Mishkin, Ninth Edition, 2010, Addison Wesley

Stock-Trak Portfolio Game – We will be playing the markets with lots of money! We will begin the semester with $100,000 each. After we review a sufficient amount of financial market material, we will add $400,000 to the fun. The cost is roughly $15 and more details will be discussed in class. The game itself is worth 10 percent of your grade. To get a perfect score, you need to make sure complete each of the following (I expect most everyone to get a perfect score here!):

· Make 20 or more trades during the trading period (currently 9/6 – 12/2). Trades must be made during Sept, Oct, and Nov.(no cramming for this assignment) otherwise 10 points will be taken off for each month missed.

· Within the 20 trades, you MUST: Trade stocks by taking a 1) long and a 2) short position, purchase stock 3) call options, 4) put options, 5) go long on interest rate futures, 6) go short on interest rate futures, 7) bet on a currency of your choice, and 8) purchase futures options(calls or puts, your choice).

· Finally, you must type up a one to two page summary of all the 8 specific trades contained in the bullet above explaining why you did what you did and how you could (expected) make money. That is, give specific scenarios consistent with you making some cash. On the back of your assignment, attach the specific information on each of the trades you refer to including the dates and quantity of each trade. This project is DUE FRIDAY, NOVEMEBER 18 before class. Note that the assignment is due well before the trading period ends. No late papers accepted.

·

Incentive Structure of the Stock-Trak Portfolio Game – In addition to the above requirements, I have added a way for you to add three percentage points to your final average. Here is how it works. During the first (or second) class, we will throw darts at the WSJ stock pages that will determine the initial “DART PORTFOLIO.” Subsequently, when we add the $400,000, we will throw more darts and add to the dart portfolio. If you beat the dart portfolio then you get the ONE extra percentage point added to your final average! Another way to add an extra percentage point to finish in the top 10% of the class. And the final way to add a percentage point to your final average is to “Beat the Market,” that is, obtain a higher rate of return than the S&P 500 during the trading period.

Suggested Reading (highly recommended)

“Wall Street Journal Guide to Understanding Money and Investing” Simply search for this title on the internet using any search engine – very very reasonable (around $5) and a book that you will want to keep if you are the least bit interested in financial markets.

The Wall Street Journal, Discount student subscriptions will be available during the first week of class. With a subscription you will have free access to the Wall Street Journal Interactive Edition on the Internet.

Welcome to ECON 351, Money and Banking!

The following tips will help you succeed in this class as well as make the class more enjoyable and useful for all concerned.

MOST IMPORTANT: Attend class! I basically test you on what I teach in the classroom. With this in mind, you should think of the textbook as a compliment to the lectures (rather than a substitute). Specifically, a substantial amount of the material that you are tested is not in the text (i.e., current events, extensions of book material, etc.). By attending class daily, you will have a good feel for what I think is important and what I don't.

Participate in Class. Nothing is worse than an economics course without dialogue. For my part, I will continuously ask questions during class. I encourage you to ask questions and/or share personal economic experiences with the class. Over the years I have learned a great deal from students such as yourself!

Keep up on current events and statistics. One important facet of the course will be discussion and applications of current events virtually every class period. Typically, questions regarding current events account for a significant portion of each exam.

Frequently check the home page. I take advantage of today's technology and use it extensively in conducting this course. I will use the home page to provide you with lecture notes, practice tests, study notes, homework assignments, summaries, articles on current events, etc. Keep in mind that you will be tested on articles that I post on the home page. If you have any trouble or questions in these matters, please see me or send me an Email.

Keep in touch throughout the semester. I basically have an open door policy and would love to chat with you. Many students have lots of trouble with Economics in general and in particular; this course. Remember, I am here to serve you.

RULES/REGULATIONS – Don’t leave early – if you must, let me know before class. BE POLITE to me and your classmates – no talking during class. TURN OFF ALL CELL PHONES BEFORE CLASS.

Academic Integrity: Dishonesty of any kind is not tolerated in this course. Dishonesty includes, but is not limited to, cheating, plagiarizing, fabricating information or citations, facilitating acts of academic dishonesty by others, having unauthorized possession of examinations, submitting work of another person or work previously used without informing the instructor, or tampering with academic work of other students. Students who are found dishonest will receive the most severe academic sanction consistent with PSU polices. A minimum penalty for any breach of academic integrity is the grade of “F” for the course. For more on academic integrity, click on or type in the following URL address:

http://econ.la.psu.edu/Undergraduate_Program/undergrad_page.htm#aca_int

Disability Access Policy: The Pennsylvania State University encourages qualified persons with disabilities to participate in its programs and activities and is committed to the policy that all people shall have equal access to programs, facilities, and admissions without regard to personal characteristics not related to ability, performance, or qualifications as determined by University policy or by state or federal authorities. If you anticipate needing any type of accommodation in this course or have questions about physical access, please tell the instructor as soon as possible.

You are required to take all the exams. If one of the midterm exams is missed due to a University Approved Excuse, the typical policy is for a make-up exam to be administered at another, agreed upon time. In ‘special’ cases, weight for that exam will be shifted to the subsequent exam. If you do not have a valid excuse, you will receive a zero for that exam. No exceptions will be made. Job interviews and travel plans (except as required by university-sponsored activities) DO NOT constitute valid excuses for missing an exam. Students should plan to be in town until they take the final exam. For more information on valid excuses, please see the Department of Economics policy on valid excuses, which is available at the department web site at: http://www.econ.psu.edu/Undergraduate_Program/undergrad_page.htm#valid

If you have a documented medical emergency and hence are unable to take an exam or a quiz please e-mail me in advance, if possible.

Please see me if you have concerns or comments about the course. In special circumstances, you may contact the Director of Undergraduate Studies in Economics or provide feedback via a comment box that the Department maintains in 608 Kern.

Tentative Course Outline (Subject to Change)

We will be following the customized material quite closely, so this is by far the most important component of the textbook materials. I suggest buying an inexpensive binder and placing the customized material in it. UNLESS OTHERWISE INDICATED, THE CHAPTERS REFERENCED BELOW ARE FROM THE CUSTOMIZED MATERIAL AND NOT FROM THE TEXTBOOK!

First third of class (roughly): Introduction, we will do Chapters 1 and 2 together with Chapter 1 being the ‘Fed’ chapter and chapter 2 being the finance chapter (part 1) that needs to be done early so that we can all play the stock market game with a clue. Chapter 3 takes us further into the world of finance.

Exam 1: Thursday Night: September 29 8:15 pm – 10:15 pm (Place TBA)

Second third of class (roughly): Chapter 4 is a review of principles with some rigor. In this chapter we dig deeper into the question: ‘what makes the economy tick?” Chapter 5 contains a cruise ship example that helps us understand some of the intricate details when it comes to steering the world’s largest economy into ‘port.’

Exam 2: Wednesday Night: October 26……. 8:15 pm – 10:15 pm (Place TBA)

Third and Final Section of class (roughly): Chapter 6: Keynesian vs. Classical Economics, the loss function and the Taylor Rule. The East Asian financial crisis, the Russian financial crisis (again, lots of terms). The notes on financial crises will be posted on our home page.

NOTE – Stock Trak Assignment DUE Friday, November 19

FINAL EXAM WILL BE ADMINISTERD DURING FINAL EXAM WEEK AND WILL BE COMPREHENSIVE

Grading Policy: I basically follow a traditional grading scale (see below). “Plusses” and “minuses” will be determined according to the distribution of the grades at the end of the semester. There are three exams, the first and second worth 20% of your grade and the final exam worth 30%. Another 20% of your grade is accounted for by quizzes and/or homework assignments throughout the semester. NOTE THAT QUIZZES MAY BE ANNOUNCED OR UNANNOUNCED (Note: Homework assignments will dominate this portion of your grade). The remaining 10% of your grade is accounted for by the Stock-Trak portfolio game that was previously explained. Note that there are no make-ups for the quizzes and late homework assignments will not be accepted. Best of luck to all!

Grading Scale: 90% + = A or A - ; 80 - 89% = B-, B or B+; 70 - 79% = C or C+; 60 - 69% = D

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