The Political Economy of Financial Markets programme (PEFM) aims to shed light on the way in which institutions, including macroeconomic policy frameworks, interact with financial markets. In the wake of the global and euro area crises, it seeks to promote a better understanding of financial markets and to contribute to improved policy formulation and ex*****on in the future. The programme was established in October 2012 at the European Studies Centre, St Antony’s College, Oxford. Its main activities are to carry out research, hold seminars and workshops, and publish findings in outlets that range from academic articles and books to policy briefings and op-ed pieces in the international press. It was launched with a joint seminar by Patricia Clavin (Professor of International History) and David Vines (Professor of Economics) on the question what lessons can be learned from the 1920s and 1930s, illustrating the programme’s inter-disciplinary approach. Three initial research groups were set up at the outset, bringing together academics, officials and market participants:
The first research topic concerns experience with Financial Integration in Europe – why this has not lived up to expectations, and implications for banking and fiscal union. Preliminary findings were presented in February 2013 in a lecture hosted by Oxonia (the Oxford Institute for Economic Policy). A draft report will be available for a regional seminar on ‘EU Banking Reform and Financial Stability in South East Europe’ in May 2013, co-hosted with South East European Studies at Oxford (SEESOX) and the Central Bank of Bosnia-Herzegovina. A seminar at the IMF and a joint workshop with Chatham House are planned later in 2013. The second current research topic is Regulatory Capture – exploring the question how relations between bankers and regulators evolved, and how they interacted with political and ideological influences in a wider ‘regulatory space’, during the run-up to the global financial crisis. A draft paper entitled ‘Regulatory Capture Revisited’ was presented at a workshop on Fundamental Issues in Regulation, convened by the Foundation for Law, Justice and Society at Wolfson College, Oxford, in March 2013. The third research topic under study at present is Macroeconomic Policies and Financial Stability – focusing on the question how monetary and fiscal policy regimes can build in the capacity to respond to destabilising imbalances in the private sector, without jeopardizing transparency and accountability. Papers are in preparation on Fiscal Policy under EMU, and on The Power of Credit. A first discussion of this material will take place at a workshop on macroeconomic policies at the European Studies Centre in mid-May 2013. These include, first, shadow banking; and second, the impact of advanced economy financial policies on emerging market countries – on both of which some joint work is planned with the Global Economic Governance programme at University College, Oxford. The use of macroprudential tools will also be studied, in the context of a broader question how to assign and calibrate economic policy instruments to pre-empt and react to destabilising financial cycles. A further priority is to assess where quantitative approaches can help bring precision and/or predictive power to political-economic work on financial markets. The work of PEFM is overseen by an Academic Steering Committee whose members are Christopher Adam, Professor of Development Economics; Othon Anastasakis, Director of the European Studies Centre; Kalypso Nicolaidis, Professor of International Relations; David Vines, Professor of Economics; and Max Watson, Director of PEFM.
