In a world where financial markets, banks, and monetary policy directly influence the daily lives of citizens, businesses, and governments, this book provides a comprehensive and modern introduction to how the financial system operates. What is money? How do banks function? Why do the decisions of central banks affect growth, inflation, investments, and ultimately, everyone's everyday life? Clearly, structured analysis, and continuous connection between theory and reality, this book answers these critical questions by examining the role of money, interest rates, banks, financial markets, and central banks in shaping economic activity. At the same time, it clarifies how risk, information, expectations, and market fluctuations influence borrowing costs and the making of economic decisions.

Glenn Hubbard and Anthony Patrick O’Brien guide the reader from the basic concepts of money and payment systems to more complex issues, such as the valuation of financial securities, the functioning of bond and stock markets, derivatives, banking intermediation, shadow banking, financial crises, and banking regulation. Particular emphasis is placed on the Federal Reserve, how monetary policy is implemented, and the international dimension of the financial system, such as the foreign exchange market and international monetary relations. Additionally, the book highlights the connection between central bank decisions, the money creation process, the Federal Reserve's balance sheet, and the transmission mechanisms of monetary policy to the real economy. It also introduces the reader to fundamental models of monetary theory and macroeconomic analysis, offering a cohesive framework for understanding the relationship between money, markets, the banking system, and overall economic activity.

The fourth American edition incorporates recent significant developments: the impacts of the Covid-19 pandemic, advancements in digital payments and fintech, new tools used by central banks, challenges posed by low interest rates, and emerging forms of financial instability. Thus, the book functions not only as a university textbook but also as a valuable guide for understanding the modern economic environment.