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Wednesday, 21 June 2017

Bilateral and regional trade agreements: A case for economic reform?

Speaker: Paul Gretton, Australian National University

Chair: David Vines, Balliol College, Oxford

In this PEFM seminar, Paul Gretton tackled one of the thorniest questions plaguing trade policy today –the implications of the shift from a multilateral system to a proliferation of bilateral and regional trade agreements (BTAs and RTAs). As global action through the Doha round has stalled and trade growth has significantly slowed down, countries have sought other instruments to advance trade liberalization. By far the most common approach has been to rely on preferential agreements, either of ‘hub-and-spoke’ nature such as the EU, or on a bilateral basis.

However, such preferential deals that liberalize trade between participants but not externally have created a phenomenon known as a ‘noodle bowl’ of agreements. Their proliferation has led to complexity through associated rafts of regulations necessary to enforce them and has eroded productivity by diverting trade from lowest cost suppliers. Thus, such BTAs and RTAs are increasingly viewed not as a stepping-stone to a global agreement, but as impeding trade liberalization.

Monday, 12 June 2017

Economic and Financial Challenges in South East Europe

Speaker: Gent Sejko, Governor, Bank of Albania
Chair: Othon Anastasakis, St Antony’s College, Oxford

Building on its long association with the Bank of Albania, PEFM was delighted to welcome its Governor, Mr. Gent Sejko, for a discussion on the role of central banks as guardians of price and financial stability. In his talk, he presented Albania’s experience in addressing the global financial crisis and its aftermath and highlighted some of the lessons learned from the perspective of a small South East European economy.

Governor Sejko began by presenting the general regional dynamics. Initially, strong financial integration with the EU benefited South East Europe, particularly through rapid credit growth. However, integration turned into a shock propagator in the aftermath of the global financial crisis. Inflation, previously a significant concern, fell across the Western Balkans. In addition, an increase in NPLs also contributed to lower growth, particularly in Albania and Serbia, while unemployment and emigration remain a challenge for the whole region. Finally, the crisis has had a structural impact on South East European economies, halving growth to 3.5% annually, and leading to declining productivity and investment rates.

Tuesday, 6 June 2017

An exposé of the Asset Management industry

Speaker: Ron Bird, University of Technology, Sydney

Chair: David Vines, Balliol College, Oxford

How can we explain the existence of a multi-trillion dollar industry that consistently underperforms? This is the provocative question that Prof. Bird addressed in his seminar talk for PEFM. In particular, he focused on asset managers, that is, those that invest other people’s funds. In this arrangement, risk stays with the fund owners who get the investment returns net of all costs, while managers charge an asset-based fee and may charge a performance fee.

The size of the industry is impressive – over 71 trillion USD worth of assets under management, with profits of 102 billion USD. The biggest division within is between active and passive management. Active managers seek to pick stocks that outperform relative to a benchmark index by overweighting better performing stocks. This is opposed to passive management, which is becoming more and more popular in recent years, accounting for up to one-third of US mutual funds.

Monday, 5 June 2017

The Changing Roles of Central Banks

Speaker: Prof. Charles Goodhart, LSE
Chair: David Vines, Balliol College, Oxford

Today there appears to be a cacophony of opinions about the future of central banks. To separate the signal from the noise, PEFM was privileged to host Prof. Goodhart. Taking a long-term view of the past and the future, he argued that the history of central banking has alternated between periods of consensus and uncertainty. Using this framework, he placed in context the many disparate debates taking place today in the world of central banking.

Prof. Goodhart began with the late Victorian consensus (1873-1914) focused on the gold standard and the real bill doctrine (the idea that the proper assets for commercial banks are bills of exchange focused on real activity). However, both of those broke down between 1914 and 1933 as they contributed to deflation and depression. Thus, a new consensus of fiscal dominance was born that lasted from 1934 to 1970. With the rise of Keynesianism and with central banks subject to financial ministries, the understanding emerged that financial instability is a result of excessive competition that squeezed profit margins and pushed banks towards riskier activities. However, between 1971 and 1990 the growth of technology and financial markets, stagflation and disputes about the appropriate anchor for monetary targets induced a period of uncertainty.

Monday, 22 May 2017

Technology and the future of the labour market

Speaker: Daniel Susskind, Balliol College, Oxford
Chair: Adam Bennett, St Antony’s College, Oxford

These days, it is hard to imagine a topic with more significant implications for the future than the impact of technology on the labour market. It is also hard to find people who have combined policy work with research on this topic, such as Daniel Susskind. In this seminar, he presented his insights, particularly regarding the role of ‘advanced’ capital in overturning traditional understandings of the relationship between technology and labour market skills.

Susskind begins by looking at historical data on the labour market. Thus, in the 20th century a ‘skills wage premium’ emerged based on increasing returns to college education. Strikingly, this premium remained even as more and more people were graduating from college due to the skill-biased nature of technological change, which meant demand for skilled labour to operate this new technology outpaced increasing supply. By contrast, in the 19th century, the industrial revolution appeared to have a bias toward increasing the demand for unskilled workers, displacing skilled workers (such as the luddites) with machines that could be operated by unskilled workers. Initial data from the 21st century suggest that today both things are happening at the same time, leading to more employment at the bottom and the very top of the skill distribution, but also to the ‘hollowing out’ the semi-skilled middle classes, which have thereby seen their wages stagnate.

Monday, 15 May 2017

Public debt in advanced countries: problems and solutions

Speaker: Carlo Cottarelli, IMF Executive Director for Italy
Chair: Charles Enoch, St Antony’s College

Following the global financial crisis, public debt spiked in many advanced countries. However, according to Carlo Cottarelli, the risks, which accompany living with high debt-to-GDP ratios, are not often discussed publicly. This has prompted him to write a book, What We Owe – Truths, Myths, and Lies about Public Debt, which forms the basis of his PEFM talk.

Cottarelli began with a striking chart demonstrating the level of public debt in advanced economies. As was clearly visible, after World War II there was an unprecedented build-up of debt in peacetime. Notably, these ratios do not include the hidden liabilities in terms of pension and healthcare entitlements, which are likely to rise, but are outside the focus of Cottarelli’s work.