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Monetary Analysis

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A. Why do people who work at investment banks earn so much?

B. What is the justification for capital requirements imposed by bank regulators?

C. Suppose a country decides it will either dollarize or create a currency board. Of these two options, why might dollarization be a better choice? Why might a currency board be a better choice?

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STEP 1
A.
There are five reasons why the people who work in investment banks earn so much. First, the people who work are recruited from the top business schools with the top grades. Second, the people with experience are hunted from positions that are already high paying. Third, traditionally the investment bank workers are high paid and are supposed master complex investment models. Fourth, the skills used on job are rare and difficult to master. Fifth, the loss of worker can cause disruption in high dollar value work and so the investment companies attempt to keep the high-flying employees with attractive salaries.

From another perspective, the people who work in investment banks are paid more because their jobs demand skills that are rare and demand efforts that are intensive. There is a real danger of burnout. Not only that when compared to other industries the level of trust and responsibility that is assigned to workers in the ...

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