The proper functioning of financial markets is essential for the functioning of any developing or advanced market economy. This course deals with important challenges to (economic) policymakers. In the first session, we lay the groundwork and refresh basic analytical instruments in economics. We introduce and discuss a modern view of the role of economics and provide an overview of fundamental results from general equilibrium theory and welfare economics. In the second session, we provide a thorough introduction to game theory and mechanism design. On this basis, we discuss why financial markets are important in practice. We analyse the role of financial intermediaries and the risks that are associated with financial intermediation. We compare traditional financial intermediation with recent innovations (peer-to-peer funding). Moreover, we study cases in which financial markets fail to work properly and we discuss appropriate policy responses. Sessions 4 and 5 are devoted to the analysis of fiscal and monetary policy measures that affect financial markets. In Session 6 students present their casework on the design of a new financial and economic order in Europe.
This course is for 1st year MIA and MPP students only.