Money and Banking Concepts

Paper Summary:

The paper discusses the monetary and banking system with respect to several theories regarding interest rates. The paper looks at some guiding principles with respect to the economy and financial infrastructure. The paper also examines several risk structures and risk assessment models.

Outline:
Abstract
Loanable Funds Theory
Liquidity Preference Theory
Risk Structure of Interest Rates
Bank Management Principles

From the Paper:

"Economics has long relied on the concept of supply and demand in the free market as one of the fields most basic tenets and this is just as true for monetary theory. In terms of interest rates and interest rate determination, the loanable funds theory of interest states that the interest rates in the market, all other things being equal, are determined through the supply of funds in that market as well as the availability of funds for lending (Walter, 2004, p.89). However, within this loanable funds theory of interest there are several related factors that affect the interest rate specifically which must be accounted for. On such basic economic premise is that the supply of loanable funds is controlled by the amount of savings in the market and the average increases in overall deposits which affect the amount of loanable funds."

Sample of Sources Used:

• Carrada-Bravo, F. (2003). Managing Global Finance in the Digital Economy. Westport, CT: Praeger.
• Kalyuzhnova, Y. & Taylor M. eds.(2001). Transitional Economies: Banking, Finance, Institutions. New York: Palgrave.
• Padoa-Schioppa, T. (2004). Regulating Finance: Balancing Freedom and Risk. Oxford: Oxford University Press.
• Walter, I. (2004). Mergers and Acquisitions in Banking and Finance: What Works, What Fails, and Why. New York: Oxford University Press.

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