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SUMMARY:The international monetary arrangement is dysfunctional: surges in
  cross-border investment flows are the source of financial turbulence.  - 
 Professor Robert Z. Aliber\, Professor Emeritus of International Economics
  and Finance\, University of Chicago Booth School of Business.
DTSTART:20141105T170000Z
DTEND:20141105T183000Z
UID:TALK55288@talks.cam.ac.uk
CONTACT:Dr Duncan Needham
DESCRIPTION:There have been four waves of banking crises since the early 1
 980s with each wave involving three\, four or more countries.  Each countr
 y that has experienced a banking crisis had previously experienced an econ
 omic boom\, and an increase in cross-border investment inflow\, which led 
 to increases in the price of its currency and an increase in the price of 
 securities.  The pace of the investment inflow was too rapid to be sustain
 ed\; when the inflow slowed\, the price of the country's currency and the 
 price of securities declined\, which triggered the banking crisis.\n\nBank
 ing crises occur when currencies are floating and when they are pegged\; c
 ountries that are members of a monetary union have also had banking crises
 . The response to a surge in investment inflows when a currency is floatin
 g differs sharply from the response when a currency is pegged because adju
 stments must ensure that there is an induced increase in the country's cur
 rent account deficit that corresponds with the autonomous increase in its 
 capital account surplus.  The increase in the prices of securities and hou
 sehold wealth is an integral part of the adjustment process.\n\nThe booms 
 initiated by the cross-border inflows lead to increases in the anticipated
  rates of return on investment\, which leads to an acceleration of inflows
  - until the lenders suddenly realized that the borrowers' are too extensi
 vely indebted.
LOCATION:Darwin College (Seminar Room\, No. 1 Newnham Terrace - entrance v
 ia Porters Lodge on Silver St)
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