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[This course aims to develop a better understanding of the linkages between the banking system and the broader macroeconomy. Particular attention will be paid to the role of banks and the banking system in propagating and perpetuating the recent financial crisis. Specific topics include the functioning of the banking system in a basic general equilibrium macro model, the Diamond-Dybvig model of bank runs; an empirical look into the economic cost of banking crises, central bank intervention in the face of a banking failure, the link between sovereign debt and the banking system, and the European debt crisis and the response of the ECB. Prerequisites: 440.601 Microeconomic Theory, 440.602 Macroeconomic Theory. Corequisites: 440.606 Econometrics; 440.640 Financial Economics