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Topics in Global Finance* EC916

Topics in Global Finance* EC916. Marcus Miller Lei Zhang. *Available to MSc Econ, MSc Econ with IFE and MSFE. Aims and Focus. Aims To provide coverage of some key issues relating to global finance.

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Topics in Global Finance* EC916

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  1. Topics in Global Finance*EC916 Marcus Miller Lei Zhang *Available to MSc Econ, MSc Econ with IFE and MSFE

  2. Aims and Focus • Aims • To provide coverage of some key issues relating to global finance. • To develop a range of appropriate analytical skills, including models of general equilibrium and of dis-equilibrium. • Focus • The contrast between the predictions of efficient market theory and inefficiencies that may result from behavioural factors and missing markets. • How this may apply to real world issues, such as global imbalances, and credit crunch.

  3. Equilibrium and dis-equilibrium perspectives Irving Fisher (1867-1947) John Maynard Keynes (1883-1946)

  4. Delivery and Assessment • Delivery • Nine two hour lectures (on Mondays) and six classes. • Note that for those taking the MSc (EIFE) there will be a workshop on Tuesdays. • Assessments • The module is examined in a one hour end of term-test (20%); • and a 2-hour written exam in May (80%), requiring answers to 2 out 5 questions.

  5. Topics/Models Foreign exchange markets Conditions for efficiency Departures from efficiency: bubbles, bulls and bears. 2. Global equilibrium: a DSGE perspective Two-bloc world economy. Emergence of global imbalances. Optimal reserve holding.

  6. Financial crises and their real effects • Liquidity shocks and unemployment: FRBNY model of Great Depression and the “Great Escape”. • Banking and bank runs: financial fragility and policy responses. • Moral hazard in banking: asymmetric information and excessive risk taking; Too Big To Fail and bailout costs.

  7. What is the contribution of the financial sector: Miracle or Mirage?

  8. Key texts and background reading • Allen, F. and D. Gale (2007), Understanding Financial Crises. Oxford University Press. • Sarno, L. and M. P. Taylor (2002), The Economics of Exchange Rates. Cambridge and New York: Cambridge University Press. • Wolf, Martin (2008), Fixing global finance, Baltimore MD: Johns Hopkins University Press.

  9. Some recent dissertation topics • A Study of Monopoly and Liquidity in Banking • The Optimal Level of Reserves: An Insurance Model With concentration of Aggregate Shocks • The Brazilian Confidence Crisis of 2002: A Global Games Approach • The US Economic Crisis: Causes and Solutions (Focusing on the Role of The Housing Market in the Crisis) • The Icelandic Crisis: Foreign Deposits, Domestic Bubble and Failing Banks • The Sovereign Wealth Fund as a Solution for Resource Curse • The Elite, the IMF & The Taxpayer: A Simple Story of Moral Hazard

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