Three topics have been selected for the initial research projects under the programme:
Financial integration in Europe
During the decade prior to 2008 the integration of financial markets in Europe deepened rapidly. This was expected to help reinvigorate growth in core Europe, to support economic catching-up in the periphery, and to promote economic risk-sharing across the monetary union. Subsequently ‘sudden stops’ occurred in intra-European capital flows, and the process of private sector financial integration has now gone into reverse. Why has financial integration in Europe apparently failed to deliver the hoped-for results, and what are the implications for the future?
Policy capture in light of the crisis
Regulatory capture in the financial sector is a topic of renewed interest in the wake of the global crisis, with suggestions of both economic and ideological forms of capture. Indeed, it seems that there may have been a wider phenomenon of ‘policy capture’, with the ideology of ‘efficient markets’ and ‘rational expectations’ perhaps inhibiting macroeconomic responses (as well as regulatory responses) to destabilising imbalances in the public sector. Can an analysis of this experience shed light on ways to inhibit capture in the future? Click here to view publication
Macroeconomic and macroprudential policy frameworks in imperfect markets
The past decade saw an IFI consensus, widely espoused in Europe, that macroeconomic policies should be set on a fixed medium-term course, with each directed to a single goal (e.g., monetary policy to inflation). Like ‘light touch regulation’, it can be argued that this relied on efficient and self-stabilising private sector behaviour. Are more discretionary monetary and fiscal regimes needed to address aberrations in private sector behaviour; or can macroprudential tools and some further ‘tweaking’ buttress adequately existing approaches?