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Money, Banking, and Financial Markets, 4/e

Stephen G. Cecchetti, Brandeis International University
Kermit L. Schoenholtz, Stern School of Business, New York University

ISBN: 007802174x
Copyright year: 2015

Feature Summary

Five Core Principles: Cecchetti and Schoenholtz use five core principles as the basis for understanding concepts. These principles enable students to focus on the big picture, and therefore learn the rationale for financial rules and institutional structure. Because students aren't overwhelmed by minute details, they are able to retain and apply the most important concepts. These five core principles are:

  • Time has value

  • Risk requires compensation

  • Information is the basis for decisions

  • Markets set prices and allocate resources

  • Stability improves welfare

Applied Organization: This book is organized to help students understand both the financial system and its economic effects on their lives. That means surveying a broad series of topics, including what money is and how it is used; what a financial instrument is and how it is valued; what a financial market is and how it works; what a financial institution is and why we need it; and what a central bank is and how it operates. More important, it means showing students how to apply the five core principles of money and banking to the evolving financial and economic arrangements that they will confront during their lifetimes.

Lasting Education: By focusing on the big picture via core principles, students learn the rationale for financial rules and institutional structure. So when the system evolves, their knowledge doesn't immediately get out of date. Rather, they can evaluate and understand any changes that develop. Students will be able to understand what they read in the business press for years to come, regardless of the field in which the student ultimately works.

Student-Friendly: Cecchetti and Schoenholtz helps students grasp concepts more quickly and less painfully by eliminating more obscure concepts and unnecessary math. Real-world examples that students can relate to are drawn from the business and financial world events to illustrate the rationale behind theory, formulas, and regulations.

Global Perspective: Cecchetti and Schoenholtz represents how the world works more realistically than other books, including a parallel discussion of the world's two most important banks—the Federal Reserve Bank and the European Central Bank (ECB). And unlike most other books, global issues are not segregated in one chapter, but found throughout all chapters. Students will get a more realistic view of how integrated the world economy has become.

Full Coverage of the European Central Bank: More comprehensive and up-to-date information regarding the ECB than any other text.

Early Introduction of Risk: Cecchetti and Schoenholtz introduce the concept of risk early and then make it a central focus throughout the book. Students see how risk is central to understanding the entire financial system.

Emphasis on Financial Instruments to describe all types of financial arrangements. Cecchetti and Schoenholtz contains separate chapters for bonds, stocks, and derivatives. Topics relating to bonds are a cornerstone of the course, and are assigned by virtually everyone who teaches the class. Stocks and derivatives are of growing importance and are of great interest to students, but there is more variance in how different courses emphasize these topics. Having separate chapters allows instructors maximum flexibility: Those with shorter courses can easily opt to skip certain topics, while others can go into as much detail as they'd like.

Your Financial World: Cecchetti and Schoenholtz includes special sections called Your Financial World that demonstrate the relevance of the material by exploring related personal-finance topics. For instance, the chapter on Understanding Risk includes a Your Financial World on choosing the right amount of car insurance, while the chapter covering Bonds and the Determination of Interest Rates relates this material to the topic of interest-only mortgages. These are examples that students can understand and help keep them motivated and interested in the course content because they can relate these scenarios to their own lives.

Clear and Flexible Monetary Policy: Cecchetti and Schoenholtz, 4e makes the coverage of monetary policy simpler for students and more flexible for instructors. Chapter 21 introduces the full macroeconomic model, including the dynamic aggregate demand curve and the aggregate supply curve, and Chapter 22 is now presented as a series of stand-alone applications of the model, ordered in increasing complexity.

Strong Pedagogy in Each Chapter: In addition to the Your Financial World and Lessons from the Crisis pieces in the text (described above), each chapter includes many features to help the student connect to the subject matter, including:

  • Applying the Concept: Drawn from history and relevant public policy debates, these sections show how to put theory into practice and provide real-world examples of the ideas introduced in the chapter.

  • In the News: Each chapter includes an article from the major business press (Wall Street Journal, New York Times, Financial Times, and the Economist) that provides practice in reading the financial news and helps students connect textbook topics that play out in the real world. Articles are followed by a brief summary that points out the lessons meant to be gleaned from the piece.

  • Tools of the Trade: Inserted where appropriate to relate practical knowledge relevant to the chapter, or provide brief reviews of basic economics necessary for understanding something in the chapter.

  • Key Terms

  • Chapter Lessons

  • Problems

Organizational Alternatives: While this book greatly streamlines the traditional approach to money and banking, it remains flexible enough to be used in a broad variety of courses.

Instructors: To experience this product firsthand, contact your McGraw-Hill Education Learning Technology Specialist.