Aims
The course gives a general overview of the recent debates on economic and financial policies in the context of de-globalization and financial crises. It begins with some stylized facts on the pause in trade globalization, the causes and symptoms of recent financial crises: banking crises, currency crises, financial crises, sovereign debt crises. These events have changed the shape of public and international policies: the G20 has become a key actor that has surpassed WTO, some countries are coming back to protectionism, central banks and governments are confronted to the Minsky moment and must tackle financial bubbles to achieve financial stability. The course also presents these topics from the viewpoint of the emerging and developing countries. It presents the three historical lending booms, their reaction during the global crisis and shed some light on the policies conducted in China which has become a major actor of multilateralism. The discussions end with a comparative approach of monetary policies in the Eurozone and in the United States: how they have varied over time and the constraints of implementing monetary and financial policies in different macroeconomic contexts.
Course outline:
Chapter 1.- The global economy in the 21st century
1.1.-A pause in trade globalization (slowdown in trade since the 2008 financial crisis, main explanations, changes in emerging economies’ fiscal policy)
1.2.- Financial globalization has slowed (home bias behaviours, failure of the interest rate parity)
1.3-Inequalities, globalization and crises (relationships between inequalities, indebtedness and globalization, empirical evidence)
1.4.- Policy implications (protectionism, bilateral agreements, the role of WTO)
Chapter 2.- Financial crises are back
2.1.- Overview of the financial system (banks’ balance sheets, financial risk, role of the financial markets)
2.2- Causes and symptoms of financial crises in the developed countries (theories of financial crises, the Minsky moment and bubbles, multi-facets of crises: banks, sovereign debt and equity markets).
2.3.- Financial crises in the emerging and developing countries (historical perspectives: the 3 lending booms, the emerging countries in the global crisis, lessons from past crises).
2.4.- Policy implications (global governance: the G20, multilateralism, the new role of the Renminbi).
Chapter 3.- Monetary policy: comparing the Federal Reserve and the European Central Bank
3.1.- General overview (historical background, tasks of respective central banks, structure of the central banking systems).
3.2.- Differences and similarities (operational procedures, monetary policy strategies)
3.3- The Fed and ECB: comparing their quantitative easing (QE) policy.