Money, Banking and Financial Markets

The book is easy to follow and presents the information in a clear and concise manner.

I teach undergrad business and economics, and have found this text to be very effective with my students, particularly as a follow-up to macro 101. One of the best things about the text is that it is well integrated; other texts seem somewhat choppy or fragmented.

This is an excellent undergraduate text on financial institutions and monetary economics. The exposition is rigorous yet avoids abstruse math. The best part is the section on monetary economics, where the author dispenses with IS/LM analysis and instead directly analyzes aggregate supply and demand. He writes from the perspective of a central banker (which he was), showing how central banks use interest rates to influence inflation and output. The writing is quite clear, and the numerous sidebars on historical and contemporary issues are excellent. Although some subjects (such as exchange rates) could have been developed in greater depth, this is a great textbook overall. Ideological footnote: Many undergraduate econ books assume (more or less explicitly) that disturbances in the macroeconomy are eventually self-correcting. This book has a somewhat different starting place: it takes it for granted that regulators will oversee the banking system and that central bankers will act to close output gaps and keep inflation under control (in fact, the latter assumption is built into the author's construction of the aggregate demand curve). According to the author, modern central banks have developed a fairly good understanding of business cycles and know how to moderate them through the use of monetary instruments. Let's hope he's right.

I've read the books of Mishkin and Hubbard, also well written pieces. However, Cecchetti seems to be able to explain concepts with more clarity and in a way that makes one remember the various theories long after reading the book. He should try to develop further the chapter on futures and give more emphasis on hedging, since this is the trend financial markets are moving towards these days, without having to impinge on books devoted solely to the topic. He may also want to expound more on the chapter covering foreign exchange and international markets, to make the book more relevant to international readers. on the chapter on monetary policy, since he touched on foreign central banks he may also wish to write about how other countries implement monetary policy, esp how the Bank of England uses the repo market to conduct money easing/contraction. Am looking forward to a much-improved version in the future.