1. 1.    Class description/introduction

This course will be dealing with one of the most important segments of economic globalization – financial liberalization and its impact on the efficiency of economic policy. Financial liberalization had become one of the integral and most important components of economic liberalization by the mid-eighties of the last century. Initiated by the early papers on the topic written in the first three years of the seventies that called for removing government control over free flows of capital, and allowing for the introduction of new financial instruments and innovations as a precondition for the faster integration of national financial markets into the global capital market, this process has caused the mega financial institutions to become the most important players on the global markets. This course will examine the early phases of financial liberalization during the nineteen-seventies and eighties, the evolving nature of mega-banks and the processes of regulation, deregulation and re-regulation based on the Basel I, Basel II and Basel III capital accord rules. Special attention will be paid to the very specific nature of the over-the-counter market for financial derivatives as one of the main reasons for the inability of the regulatory bodies to impose their control on the market, and to the importance of changes in prices of assets – financial assets and property prices – for the scope and ability to conduct efficient monetary policy in a highly interconnected world of international finance.  

  1. 2.    Class aims

The main goal of this course is to examine the effects of financial liberalization on the efficiency of economic policy in general, and more specifically on the efficiency of monetary and fiscal policy.