About Us

The main aim of the World Economy and Finance Research Programme
is to advance knowledge of the inter-relationships between financial markets and economic growth and stability.
Tweny six research groups in top universities throughout the United Kingdom are carrying out this work.
The Programme is fully funded by the independent Economics and Social Research Council (ESRC) and runs until 2009

Forthcoming Events

14 December 2007
Conference: "When the Music Stops: Private Equity, Securitisation and the future of Capital Markets"
University of Sydney Law School
Full details here and on the WEF website

17-18 March 2008
Conference: "The Politics of Pro-Poor Economic Strategies"
Washington DC
Details to be confirmed
Contact Paul Mosely, University of Sheffield

4-6 April 2008
Conference: "The IMF and Financial Crises"
Judge Management School, University of Cambridge
Contact Kern Alexander, Judge Management School
More information here

24-25 April 2008
International Monetary Fund and World Economy and Finance Conference on International Macro-Finance.
IMF Headquarters, Washington DC
The conference will provide a forum to present recent theoretical and empirical research narrowing the gap between "open-economy macro" and "finance" approaches to international financial issues.
Full details and a call for papers can be found here

11-12 July 2008
Workshop on International Finance
University of Warwick
Topics will include: financial contagion, sovereign debt, political economy and behavioural economics
Contact: Lei Zhang (project page here)

10-12 September 2008
Money Macro Finance research group annnual conference
Birkbeck College
Details will be on the WEF website and the MMF website

World Economy and Finance e-newsletter

WELCOME to the third e-newsletter from the Economic and Social Research Council's World Economy and Finance Programme. This newsletter sketches some key developments. I hope you find it useful and informative. More information about the Programme - information on all the projects, publications, discussion papers, conferences, and other events - can be found on our website. If you have received this newsletter in error or do not wish to receive further issues, then please reply to the email with the word `unsubscribe` in the subject heading.

Prof John Driffill, Programme Director

Financial Market Instability and Banking Crises

The financial market crisis continues to unfold, as large financial institutions reveal losses they have suffered from involvement in the US sub-prime mortgage market. The future of Northern Rock in the UK remains uncertain, caught between bidders looking for a bargain and the British government hoping not to lose any taxpayers' money. Meanwhile the housing market in the Unites States appears likely to fall further, worsening the problems. And the UK market also looks likely to fall in the coming months. Research carried out under the ESRC World Economy and Finance programme throws light on the underlying causes of these events. Particularly prominent are the projects "Stability of the Global Financial System: Regulation and Policy Response" led by Charles Goodhart (London School of Economics) and Hyun Song Shin (Princeton University), and "Regulatory Regime Change in World Financial Markets: The Case of Sarbanes-Oxley" led by Justin O'Brien (Australian National University) and Sally Wheeler (Queen's University Belfast).

On 1st October 2007 the Financial Markets Group at the London School of Economics held a conference on the Financial Crisis. (Presentations can be found here)

On 14th December 2007, a conference "When the Music Stops", organised by Justin O'Brien, will take place at the University of Sydney, Australia. Programme here.

Hyun Song Shin and Adrian Tobias show in a recent paper entitled "Liquidity and Leverage" that management of liquidity and leverage by large financial intermediaries (focusing on New York investment banks like Bear Stearns, Goldman Sachs, Lehmann Brothers, Merrill Lynch, and Morgan Stanley) amplify fluctuations. They have evidence that these institutions, whose balance sheets are continuously marked to market, expand their balance sheets when markets are buoyant and increase their leverage. Conversely, when markets decline, they reduce their assets and cause leverage to fall. "Marked-to-market leverage is strongly pro-cyclical", they observe. While this behaviour is rational at the level of individual firms, for the market as a whole it increases the volatility of asset prices. It may have contributed to excessive lending to the sub-prime mortgage market in the United States. Shin and Tobias conclude their paper with the warning " ....we have seen that when balance sheets are expanding fast enough, even borrowers that do not have the means to repay are granted credit – so intense is the urge to employ surplus capital. The seeds of the subsequent downturn in the credit cycle are thus sown."
(A copy of the paper can be found on Hyun Song Shin's Princeton web site )

Project Profile

Risk Culture in China: An Economic Sociology

China grows ever more prominent in global trade and finance.  How will it diversify its huge dollar-denominated foreign exchange reserves, and what repercussions will this have for exchange rates and growth in the US and Europe?  Will China be able to better harness its own enormous supply of savings for its development?  The behaviour of financial markets in China and their constituent institutions is of paramount importance.   
This project studies incomplete financial markets and not fully developed financial institutions in China. It draws on the sociology of risk and complexity, with a particular focus on 'risk cultures'. There will be case studies of six organisations in China and the UK, each with a particular risk culture, a function of a unique organisational memory. This memory will be a function of the history of the organisation's encounters with its financial environment. The organisations are: (1) a Hong Kong investment bank specialising in technological media, (2) Shanghai's leading property developer, (3) The Canary Wharf Group, (4) The Shanghai and Pudong Development Bank, (5) The Hong Kong Exchange, (6) HSBC's China operations. The study will focus on investment in property and technological media. The study of risk cultures will comprise a large element of political risk, as the research tracks a series of international investment projects with a high degree of state interaction. The research addresses the emerging institutional forms that are central to the financial markets' influence on major global issues. The research will develop understanding of capital mobility and its relationship to institutional and economic development, the relationship between finance and growth, and cross-country variation in institutional quality.

The research will be carried out by Professors Scott Lash and Michael Keith, Goldsmiths, University of London, and Dr Jakib Arnoldi, University of Munich. Contacts: Prof Scott Lash, Centre for Cultural Studies (CCS), Goldsmiths, University of London, London SE14 6NW.  Tel: 020 7979 7982. Email: s.lash@gold.ac.uk. The project's web page may be found here.

Complementary research on China is carried out within the WEF Programme by Professor Rhys Jenkins of the University of East Anglia (here is a summary of his project) who examines the effects of Chinese expansion on Latin American economies.  Dr Chenggang Xu (London School of  Economics) is working with colleagues looking at the role of financial markets in Chinese growth. 
He presented a paper "Finance and Growth in Chinese Regions" written with Panicos Demetriades, Jun Du, and Sourafel Girma) at a conference in June this year.  Details of their project may be found here.  Chenggang Xu may be contacted via his web page at the London School of Economics here.