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Instructor: Professor Angelos Antzoulatos , Professor Gkikas Hardouvelis

Course: Banking


 

This course presents a comprehensive framework to understand the structure, functions, value-added and institutional framework of the financial system. To this end, it combines the neoclassical competitive model, in which the financial system acts like a veil with no real consequences, with more recent theoretical developments that stress the role of asymmetric information, incentives and of the institutional framework.

The course covers a broad range of topics. Prominent among them are the relationship between financial and economic development, the role of capital markets and financial intermediaries (banks, …) in the financial system, the role of information and incentives for the efficient operation of the system. Additionally, it explores the goals of the institutional framework and the fine trade-off it strives to achieve between the efficiency and the stability of the financial system. It also analyzes Basle II, the constraints it places on the operations of commercial banks and the opportunities (and temptation) for regulatory arbitrage.

On several occasions, the analysis is done under the prism of ‘Emerging Markets’, for their frequent crises highlight the importance of a well-functioning financial system in an environment where ‘the rule of law’ prevails. In these ‘Markets’, the interactions of domestic and international financial markets with the government and the central banks, in a poor institutional environment and in conjunction with severe macroeconomic imbalances and microeconomic rigidities, create opportunities for high profits as well as high risks. These ‘Markets’ are also characterized by bouts of over-optimistic expectations that usually end in crises and severe economic dislocation with high social cost.