Financial Development

Open to all SIPA with pre-req or concurrent-req: Macroeconomics. This course aims to provide a well-rounded understanding of financial development over time and across countries, with an emphasis on public policy. Topics include a review of the foundations and processes of financial development; the roles of markets, instruments, and institutions; issues related to systemic financial stability; links to financial repression and globalization; and the developmental and oversight roles of the state. Financial activities arise in response to the interplay of a few easily identifiable frictions and related market failures, operating within an evolving institutional environment and uncertain macroeconomic context. Finance has both a bright side (welfare-enhancing financial development) and a dark side (financial instability and potential excess finance).

This conceptualization of financial development is supported by a review of the fundamental foundations of finance through simple modeling exercises, statistical illustrations of financial trends, and references to specific country experiences, many drawn from the work of IMF or World Bank financial sector-related missions.

Recitation slots will be used for guest lectures on frontier issues or for instructor-led discussions. These sessions may cover some of the analytical underpinnings for subsequent lectures, explore the policy implications of recent topics, or actively debate themes of special interest to students.