Financial systems and economic development
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- Term 1
The objective of this course is to develop students’ understanding of the main economic relationships that arise between the financial sector and the ‘real economy’ in the course of economic development. The course has the following two aims:
The first is critically to discuss theoretical models explaining the special role of domestic finance in a capitalist economy. The focus of analysis will be on financial intermediation. Mainstream neoclassical views based on information-theoretic analysis will be contrasted with political economy views stressing the particular character of industrial, merchant, money-dealing, and interest-bearing capital.
The second, is to analyse the two-way relationship between the domestic financial system and the ‘real economy’. To achieve this aim we will focus on the political economy of credit and examine the layering of the financial system. We will then examine the importance of broader social relations (trust, confidence, power) in the operations of financial institutions and markets. We will also discuss microfinance and its role in economic development.
This course will also briefly cover international finance, partly through historical analysis of international financial flows in the twentieth century.
Objectives and learning outcomes of the course
On successful completion of the course, students will be able to:
- Develop students’ understanding of the relationship between the financial sector and the ‘real economy’ in the course of economic development.
- Critically to discuss theoretical models that explain the special role of domestic finance in a capitalist economy.
- Analyse financial intermediation, specifically, mainstream neoclassical models based on information-theoretic analysis are extensively discussed. These models are subsequently contrasted with theoretical views that draw on the political economy of finance.
- Analyse and discuss the processes of information-gathering and evaluation by the financial sector
- Develop formal models as well as applying them in econometric work.
- Identify the social and institutional underpinnings of financial activity.
- Analyse the two-way relationship between the domestic financial system and the ‘real economy’ in the course of economic development.
- To assemble data and synthesise theoretical insights that are relevant to the political economy of finance and development.