On Thursday, 27th June 2019, ICEF’s Associate Professor Udara Peiris delivered his lecture called “Global Financial Crisis and Subsequent Government and Central Bank Policies” to the participants of HSE Summer University in Moscow, Russia.
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The topic has aroused interest among international students from Europe, Northern America, Asia and Africa.
Prof. Udara Peiris’s research focuses on monetary policy, financial stability and international finance and has been published in leading international journals including Economic Theory, Journal of Mathematical Economics, Journal of Financial Stability and Journal of Economic Dynamics and Control. He has presented his research to universities and institutions around the world including the IMF, Bank of England and Board of Governors of the Federal Reserve System.
Prof. Udara Peiris gave a very thought provoking and informative lecture. He gave a brief overview of the Global Financial Crisis, its characteristics, causes, transmission mechanisms, and policy response to it. The two main causes listed were the increase in interest rates and the government fiscal imbalance. The cited characteristics of the crisis included high leverage that had caused financial institutions to perform poorly; failure of the banking system; uncertainty about macro economy; asset price declines; among others. He then showcased the trend of leverage ratios, market capitalization ratios and shareholder equity of US banks, and the trend in current account imbalances of different countries etc. The policy options taken included monetary tightening and linking of private debt to sovereign debt by the government. These policies, however, targeted only a number of banks that were at risk of insolvency. Instead, macroprudential policies – the ones that pay attention to the interconnectedness of financial institutions and aim to mitigate systemic risk of the financial system as a whole, for example liquidity requirements, provisioning rules and multiple regulations – should have been opted for. Students raised some interesting questions on the topic with genuine interest and desire to know more. One of their questions related to Lehman Brothers investment bank in the United States and why they were not bailed out of bankruptcy and whether the situation would have improved if had they been. Another student wanted to know whether any lessons were learnt from this crisis and whether countries were well prepared in case of another crisis.
In the final part of his lecture Prof. Peiris introduced the audience to MSc Financial Economics programme and its courses, one being Advanced Asset Pricing, taught by visiting professor Dimitrios P. Tsomocos of Oxford Said Business School and encompassing such topics as default penalties and financial regulation which were also mentioned in the lecture. He also dwelled on the career opportunities prospective students might expect upon completion on the MSc programme in the field of investment banking, asset management and academia.
