Current projects in this research topic
Research in this area focuses on current developments and basic trends in the global financial system that challenge national and international monetary policy as well as the regulation of financial institutions. The need to investigate these issues arises because potential consequences of financial innovation and the continuously changing linkages between the markets for money, credit and foreign exchange and the real economy are only little understood so far. The divergence of the regionally limited influence of economic policy and the global dimension of financial markets limits the efficacy of policy measures, be it with regard to monetary policy or to regulation and supervision. At the same time, with the ongoing integration of formerly peripheral countries into the world economy the conditions change under which international monetary institutions like the IMF can foster stability.
The key research questions concern financial stability and exchange rate risks. New challenges for the maintaining of financial stability result from the changing nature of firms, the need to further consolidate the financial sectors, the increased interdependencies between asset and credit markets, the speed of financial innovation, as well as the rapidly growing importance of unregulated financial institutions like hedge funds. Questions that are relevant for economic policy refer to the balance between promoting financial innovation and stability, the exploitation of the benefits of financial integration while lowering the associated risks, and the assessment of the real economic consequences of financial crises. With respect to exchange rate risk, the key research question is about the causes of disturbances in foreign exchange markets and how the risk of currency crises can be quantified. Micro-founded theories of currency crisis give the analysis a new direction. The method of the signaling approach will be continuously advanced by applying state-of-the-art econometric tools. Exchange rate regimes are also in the focus of the analysis, in particular endeavors to regional monetary integration, by paying special attention to the international monetary order.
The research topic is embedded in the graduate program jointly managed with the Friedrich-Schiller-University Jena and the Martin-Luther-University Halle-Wittenberg „Constitutional Foundations of Global Financial Markets – Stability and Change”. It is supported by Stiftung Geld und Währung.
Current projects in this research topic