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.
Twenty six research groups in top universities throughout the United Kingdom are carrying out this work. The Programme is fully funded by the independent Economic and Social Research Council (ESRC) and runs until 2009.

Events and News

As part of our remit from the ESRC to communicate our research with external stakeholders and policy makers we run regular events to provide briefings and enter into dialogue about our results. You may wish to note the following dates for your diary. All are welcome at these events.

Wed 21 June 2006
5.30-6.30 pm
WEFP/CEPR
Discussion Meeting
Location: CEPR,
90-98 Goswell Rd,
London EC1V 7RR
Stijn Claessens (World Bank and University of Amsterdam) and Geoffrey Underhill (University of Amsterdam)
`Basel II: Capital Adequacy and Risk Management`
(details on WEFP and CEPR websites)

Thurs 22 June 2006
1-5 pm
Global Imbalances Workshop
Location: Birkbeck College
(details on WEFP and CEPR websites)

27-29 September 2006
1st Annual GARNET Conference
`Global, Financial and Monetary Governance, the EU, and Emerging Market Economies`
De Nederlandsche Bank (Dutch Central Bank)
(details on WEFP website)

World Economy and Finance Programme e-newsletter

WELCOME to the first e-newsletter from the Economic and Social Research Council`s World Economy and Finance Programme. You are receiving this email either because you have previously shown an interest in the programme or I have identified you as someone very likely to have a strong professional interest in it.

This quarterly newsletter is designed to bring you up-to-date with the latest research from this ambitious £5million programme, which is fully funded by the independent Economic and Social Research Council (ESRC).

We will bring you the latest results and news of our recent publications from leading academics addressing how financial markets currently affect issues of central concern to UK policy makers and assessing ways Government can respond to current and future challenges.

The World Economy and Finance Programme has a remit from the ESRC to communicate our research with external stakeholders and policy makers. Our aim is to engage with those groups at every stage of the work, to provide cutting edge, balanced and relevant research that will assist the policy making process.

More information can be found on our website.

Prof John Driffill, Programme Director

The Bank of England is responsible for maintaining monetary and financial stability in the United Kingdom. To carry out these functions effectively in a continually evolving world, the Bank needs to have at its disposal the best possible understanding of the workings of financial markets, the UK economy, and the global economy. The Bank's substantial investment in research benefits greatly from its interaction with academics and other experts in the UK and throughout the world. The Bank warmly welcomes the ESRC's initiative in establishing the World Economy and Finance Programme, which will strengthen the UK's research capacity in macroeconomics, finance, and related areas. The Programme assembles a number of highly distinguished research groups.
We look forward to its making contributions of lasting significance to the subject, as well as offering findings of more immediate policy relevance, and of value to a wide range of people concerned with the economy and financial markets

Charles Bean
Chief Economist and Executive Director, Bank of England

Our research

The first batch of research projects awarded in 2005 gives a flavour of the programme’s range. Professor Paul Collier of Oxford University leads a team studying the management of macroeconomic risks in developing countries (for details click here), while Dr Campbell Leith of Glasgow and Professor Simon Wren-Lewis of Exeter examine a question raised by the Treasury’s euro assessment in 2003: whether, in policy environments where there is little scope for an independent monetary policy, fiscal policy should be used more actively as a stabilisation tool (for details click here).

Dr Hamid Sabourian of Cambridge leads a project examining the rational foundations of apparently irrational behaviour in financial markets, such as herding (for details click here).

Professor Charles Goodhart of the London School of Economics, with Hyun Shin of Princeton University, looks at the appropriate regulatory and policy responses to ensuring the stability of the global financial system (for details click here).

Rather different is a project led by Professor Simon Deakin of Cambridge on Law, Finance and Development, which researches the impact of the law on national systems of governance, and draws out the implications of legal reform for economic development (for details click here).A project on regulatory regime change in world financial markets, under Dr Justin O’Brien of Queen’s University, Belfast, specifically focuses on Sarbanes-Oxley (for details click here). Dr Colin Rowat of Birmingham University studies the effect of weak property rights on economic development (for details click here).

One key issue arising from debt relief in Africa is whether debt write offs may, in fact, be disadvantageous for debtor nations in the long run. Dr Lei Zhang is investigating this with his team at Warwick University (for details click here).

Among other projects, Professor Steve Bond of the Institute of Fiscal Studies is studying the constraints on business investment in developed countries (for details click here). Professor Sheldon Leader of Essex is leading a team examining how project finance influences the major global issues of sustainable development (for details click here).
Full details of all our projects can be found on the projects pages of our website.

Project Profile

Each newsletter will feature a different project. This edition looks at:

Re-Instating Fiscal Policy as a Stabilization Device
Campbell Leith and Simon Wren-Lewis

A discussion paper issued by HM Treasury in 2003 raised the possibility of reinstating a stabilisation role for discretionary fiscal policy. This project evaluates such proposals, particularly when monetary policy instruments have been relinquished as part of EMU.
In one of their early papers, Leith and Wren-Lewis examine a situation in which the government of an economy can vary government spending, sales taxes and income taxes in order to counter fluctuations in gross domestic product or unemployment. They show that, when the country has a floating exchange rate, and therefore has an independent monetary policy, many shocks to the economy can be countered by appropriate choices of tax rates. Changing government spending is less important. However, when an economy is part of a larger monetary union, and monetary policy is not necessarily well-attuned to local needs, variations in government spending become a more important tool, as they can partly substitute for missing monetary policy.
Ongoing research will inter alia test the robustness of these conclusions when the analysis is embedded in a more richly detailed model of the economy.