Ahead of teaching corporate finance each year, I like to try to explain what a corporation actually is. * A corporation is a particular way of organising economic activities. What is called a corporation in the US is called a … Continued
Climate change is a systematic risk * In the standard theory of portfolio diversification, we divide risk into systematic and idiosyncratic or diversifiable risk. We argue that idiosyncratic risks can be diversified away, so there is no market reward for … Continued
Each year on the Master of Finance core course on Financial Institutions and Markets, I do a session on the Great Financial Crisis of 2007-09. One thing I emphasise is the many different causes of this highly influential event, which … Continued
People are often surprised when they ask economists, what is money, and the reply is, well, anything that fulfills the functions of money is money: money is as money does. The classic definition of money is anything that is: i) … Continued
I see my job as trying to understand what is going on in the world of economics and finance, mainly by reading the research of others, and communicating it as best I can to others. It’s a privilege of my … Continued
A lot of people in the richer economies appear doubtful that economic globalisation has been good for them. But there are hundreds of millions in the rest of the world for whom globalisation has been a critical part of their … Continued
Venezuela’s economic difficulties include very high inflation which threatens to become another example of hyperinflation. But what is this and why is it historically quite rare? * Inflation in Venezuela has recently been reported as reaching 46,000% with the IMF … Continued
P2P (peer-to-peer) lending is the biggest and most developed form of alternative finance. But does it have any enduring value to add in the financial system? * P2P lending platforms have sprung up in many countries since the global financial crisis, … Continued
As we commemorate the 10th anniversary of the Lehman Brothers bankruptcy, which marked the point where the US financial system truly moved into crisis, it’s worth reviewing the innovations that led to the real estate bubble that lay behind Lehman’s … Continued
The high and rising level of Chinese corporate and local government debt has been a concern for several years. Recent data from the People’s Bank of China suggests the true figure may be much higher than we thought, but things … Continued
In part of my new MFin elective Understanding the Global Economy and Financial System I explore the changing views of economists on international trade, which has been one of the most powerful causes of global economic growth over centuries. * The … Continued
The first part of my new MFin elective Understanding the World Economy and Financial System next term will explore the question, why are some countries richer than others? * One of the most important, interesting but hotly contested questions in economics … Continued
Former IMF Chief Economist Eswar Prasad’s excellent book Gaining Currency – The Rise of The Renminbi starts with a fascinating chapter on China’s monetary history, the longest by far of any country. The book is ultimately a persuasive answer to the … Continued
The possibility that central banks might resort to extreme monetary measures, including helicopter money, is much debated in monetary policy circles. But what is “helicopter money”? * In normal times, central banks in developed countries try to control inflation and … Continued
A bond is a long term debt security, which can be issued by a government, company or even a charity. This post describes the main features of bonds. * A bond is a debt security for which the term (maturity) … Continued