Monday, February 26 · 12:10 – 1:40 pm EST
The Columbia Center for Political Economy’s Money and Finance Idea Lab’s The Political Economy of Liquidity seminar is returning for this spring term! Please join Perry Mehrling and Waltraud Schelkle for a new session on “Emergency Liquidity Management – Bagehot versus Kindleberger.” From the organizers:
The Political Economy of Liquidity, Part II
Money and finance are at once deeply imbricated and worlds apart. Different disciplines address one or the other in academia – money being relegated primarily to the field of macro-economics, whereas finance is treated with the tools of microeconomics and split between economics departments and business schools. Legal scholars have long ignored money and studied finance through the lens of banking or securities (capital market) regulation. And yet, a series of crises in recent decades has demonstrated how closely intertwined money and finance are, how deeply monetary policy affects not just interest rates, but the organization of markets and the instruments and intermediaries created by private actors. Conversely, financial innovations, such as the rise of the shadow banking system, or cryptocurrencies pose new challenges not just to financial regulation, but also to monetary policy.
This seminar aims at probing deeper into the relation of money and finance theoretically and concretely in terms of the institutional configurations of markets and their governance. It will be organized around themes that explore the intersection of money and finance. This term’s topic will be “The Political Economy of Liquidity, Part II.” It will convene four times during the spring 2024 term and is open access (subject only to registration). Each session will be introduced by two discussants before opening the seminar for a general discussion. Readings will be distributed in advance and made available online.
Session 1: Emergency Liquidity Management – Bagehot versus Kindleberger
Monday, February 26, 2024 | 12:10-1:40 pm ET
How should central banks organize their emergency liquidity management? Oft-cited is the Bagehot maxime, which advises lending freely against collateral but at high rates. Actual lending practices in recent crises (from 2008 to 2020 to 2022/2023) are closer to Kindlebergers’ account of emergency interventions, which have been more discretionary and less punitive than Bagehot’s maxime. The reason may be that in the midst of a crisis, distinguishing between insolvent and illiquid financial intermediaries may be impossible. Nonetheless, this practice poses questions of moral hazard and encourages private actors to take on additional risks in the expectation that should the risk materialize, central banks will stand ready to absorb it. This session discusses these different approaches to liquidity management, their interaction with the foreign exchange regime (gold standard vs. floating rates), and their implications for the future of finance.
Commentators: Perry Mehrling and Waltraud Schelkle
Zoom link: https://columbiauniversity.zoom.us/j/91268710173?pwd=VEpXbm1FZXAyMnhEZVJGWjRiTklUUT09&from=addon
Registrations and additional information are available here. For more information on the Center for Political Economy, including upcoming events, please visit the Center’s website.