How to measure financial integration?

Alexandra Zeitz (Global Economic Governance Programme, University of Oxford)

Speaker: Professor Jennifer Corbett, Australian National University

Chair: Robin McConnachie, Oxford Analytica

Though we know financial integration is deepening, we still know woefully little about how to measure or observe financial integration. In a seminar at PEFM in June, Professor Jennifer Corbett introduced a new research project that uses network analysis to try to address this gap and reveal patterns of financial interconnection.

The motivation for Corbett’s research is clear, given her focus on the East Asian economy and financial system. In the aftermath of the 1997 Asian financial crisis, many regional analysts concluded that the risks had stemmed from dependence on foreign intermediation. The policy prescription was thus to increase regional financial integration, especially in local currencies, with deeper, more tightly integrated markets seen as a driver of stability.

But, as Corbett pointed out in her presentation, the repercussions of tighter integration remain understudied. In part, this is because existing models of financial integration remain simplistic.

Truths, partial truths and myths: Inside the Irish ‘bailout’

Alexandra Zeitz (Global Economic Governance Programme, University of Oxford)

Speaker: Patrick Honohan, Governor, Central Bank of Ireland
Chair: David Vines, Balliol College, University of Oxford

For a second year in a row, Ireland will be the fastest growing economy in Europe in 2015. Unemployment remains in the double digits and public debt is high at 115% of GDP, but the country’s recovery from its banking-cum-sovereign debt crisis in 2008 has been remarkable.

It was an honor for PEFM to host Patrick Honohan, Governor of the Central Bank of Ireland in May to hear the story of both the crisis and the ‘bailout’ from the inside.

The recovery package Ireland received from its international creditors remains contentious, its legacy hotly debated in Ireland and across Europe, since Ireland offers possible lessons for the contemporary Greek experience. Governor Honohan waded directly into the debate, structuring his remarks around the truths, partial truths and myths of the Irish bailout.

Did the government’s decision to guarantee Ireland’s banks cripple the Irish economy and directly lead to austerity?

In September 2008, the Irish government issued a broad state guarantee for all Irish banks for a year. The decision remains controversial, with critics claiming that the blanket bank guarantee was responsible plunging the country into recession as sovereign borrowing costs soared, ultimately prompting the international recovery programme and a harsh period of austerity.

Culture as the basis for trust: Rebuilding trust in banks

Alexandra Zeitz (Global Economic Governance Programme, University of Oxford)

Speaker: Peter Montagnon, Associate Director, Institute of Business Ethics

Chair:  Adam Bennett, St. Antony’s College, University of Oxford

Scandals continue to wrack the finance industry. On May 20, six banks were fined $5.6 billion over rigging of the foreign exchange markets. The need to address corporate culture in the finance sector seems clear.

The PEFM series has tackled culture and finance repeatedly over the past year. And the industry itself hasn’t been silent on the question of culture. Barclays, for instance, launched the ‘Transform’ programme to restore trust in the bank and place its values at the centre of its operations. 

But are attempts to reform culture genuine? And can they have an impact? In early May, PEFM hosted Peter Montagnon, Associate Director of the Institute for Business Ethics to discuss rebuilding trust in banks on the basis of cultural change. 

Montagnon’s core point was a simple but important one: culture must be understood as belonging at the heart of business, not a peripheral PR gloss. Culture, in the Institute for Business Ethics framework, is made up of core values, the ethics they imply, and the conduct that follows from those ethics. The values of a company set the tone for the behavior of all employees.

Innovations in monetary policy measures: The view from Slovenia

Alexandra Zeitz (Global Economic Governance Programme, University of Oxford)

On Tuesday May 5, PEFM was treated to a rare and candid insight into non-standard monetary policy measures, as Governor Boštjan Jazbec of the Bank of Slovenia discussed the effectiveness of these policies both at the European and national level.

How to evaluate European experiments with unconventional monetary policy measures? On the one hand, some analysts claim that the European Central Bank’s (ECB) experimentation was too little too late, lagging behind the quantitative easing (QE) programmes of the US Federal Reserve and the Bank of England. And yet, the most far-reaching of these policy measures, the expanded asset purchase program was launched just under four months ago, too little time to evaluate its effectiveness.

Jazbec has been governor of Slovenia’s central bank since July 2013. He insisted that non-standard policy measures in the Eurozone must be understood as a whole package, encompassing a range of temporary measures aimed at shoring up the effectiveness of monetary policy in a context of financial system distress: refinancing operations, currency swap arrangements, collateral requirements, securities purchase programmes, and negative deposit rates and forward guidance.

Too big to jail? Prosecuting financial misconduct in the US

Alexandra Zeitz (Global Economic Governance Programme, University of Oxford)


Speaker: Brandon L. Garrett, Professor of Law, University of Virginia
Chair: Stewart Fleming, Senior Member, St. Antony’s College, University of Oxford

There are several tools for improving conduct in the financial industry: addressing culture and ethics, improving supervisory oversight, tightening regulation. But when a pattern of misconduct has occurred, it becomes time for law enforcement to step in.

Over the last years there have been high profiles cases of investigations and prosecutions into criminal misconduct by banks. This has been most frequent in the US, leading the Financial Times to dub the American Department of Justice “the harshest prosecutor of corporate offences in the world”.

Yet all is often not as it seems with these high-profile cases and penalties, as Brandon Garrett, Professor of Law at the University of Virginia, explained at a PEFM seminar in early June. Garrett recently published a book on the matter, Too Big to Jail: How Prosecutors Compromise with Corporations.

Jump-starting infrastructure investment in Germany: what role for public private partnerships?

Alexandra Zeitz (Global Economic Governance Programme, University of Oxford)

Speaker: Jeromin Zettelmeyer, Director-General, Economic Policy, Ministry of Economic Affairs and Energy, Germany

Chair: David Vines, Department of Economics, University of Oxford

Germany is considering restructuring how it finances domestic infrastructure. This is of interest to non-Germans too, since infrastructure spending could eat into some of Germany’s 8% current account surplus, helping to correct the macroeconomic imbalances currently plaguing Europe.

But while that might be a pleasant side effect, that’s not the German motivation for this investigation. Instead, Germany wants to rejuvenate its domestic infrastructure, some of which is languishing after municipalities’ spending on construction and maintenance dropped to an all-time low.

In May, Jeromin Zettelmeyer, currently Director-General of the Economic Policy unit at the Ministry of Economic Affairs and Energy in Germany, delivered an excellent PEFM seminar on strategies for fuelling infrastructure investment in Germany.

In the World Economic Forum’s 2014-2015 competitiveness rankings, Germany’s infrastructure ranks 7^th globally, ahead of France (8), the UK (10), the USA (12) and Canada (15). But a gap has accumulated between the desired and actual infrastructure stocks: the German infrastructure is in some cases not meeting the public or the economy’s needs.

Lessons from Ireland’s financial crisis

Alexandra Zeitz (Global Economic Governance Programme, University of Oxford)

What lessons can be learned from the Irish financial crisis? The question is particularly pressing as negotiations continue over the terms of the Greek bailout. Speaking at PEFM in early March, Ajai Chopra offered an insider’s perspective on the crisis and rescue, and shared words of caution about treating the Irish experience as a model that can be replicated elsewhere. Chopra, now with the Peterson Institute for International Economics, was head of the IMF’s mission in Ireland and had a front seat to the crisis and negotiations over policies for recovery.