Tag: International Finance

Who benefits from using Derivatives?

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By Praveen Gupta
What is CGR PhD's research about?
Introducing research projects of CGR PhD members

Financial Derivatives are instruments that were invented, at least in theory, to protect us from various risks arising in uncertain markets. In an ideal world, they were expected to work like this:

However, a combination of weak regulatory framework, individual greed and financial innovation gone rouge, resulted in 2008 financial crisis, which many blame on excessive and sometimes illegitimate use of Financial Derivatives.

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Prof Sushanta Mallick’s up-coming Inaugural lecture “How did the ‘open door policy’ help in catching-up? The Great Liberalisation of the 1990s”

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The next Tuesday 28th of March, Prof Sushanta Mallick – CGR member and Professor of International Finance at the School of Business and Management, Queen Mary University of London–  will deliver his Inaugural Lecture, examining how far the developing countries have come in their process of growth following the rapid pace of policy reforms in the 1990s.  Prof Mallick makes a key distinction between trade and financial liberalisation, finding that many low-income countries have benefitted from trade openness in improving their pricing power in the global market place but there is a long way to go to achieve the degree of financial deepening or openness that exists in high-income countries. 

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“Unconventional monetary policy in the past: Lessons for today” CGR working paper covered in VOX

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In one of the latest CGR working papers, “Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the Regime Shift to Paper Money, 1791-1821”, Prof Patrick O’Brien and Dr Nuno Palma obtain important lessons of past monetary policies to explain today’s unconventional monetary policies. As they describe in the abstract:
 

“The Bank Restriction Act of 1797 made legal the Bank of England’s suspension of the convertibility of its banknotes. The current historical consensus is that it was a result of the state’s need to finance the war, France’s remonetisation, a loss of confidence in the English country banks, and a run on the Bank of England’s reserves. We argue that while these factors help us understand the timing of the Restriction period, they cannot explain its success. We deploy new long-term data which leads us to a complementary explanation: the policy succeeded thanks to the reputation of the Bank of England, achieved through a century of monetary stability”

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