Globalisation and international markets

This course is designed to provide an understanding Globalization and the challenges raised by globalization for government action and economic policy. Since half of century the world has changed structurally as there has been an increase in global transactions. This globalization of economic activity involves the expansion of international trade between nations, but the growth in international financial flows has been much more significant. The 2007 crisis is a good illustration of how international financial flows spill over the US crisis to the rest of the world. Since then governments have been struggling to implement the “right “ economic policy to stabilize their economy and restart their economic activity. The revival of protectionism is an expression of discontent by the population in front of governments judged “unable” to improve the economic situation. The recent crises underlined the complexity of the globalized economic and the interconnectedness of the financial markets at the international level. It also underlined the tight links between financial markets and the banking sector. In front of that complexity central banks seems to believe that they had to “reinvent” monetary policy and they step into unexplored territories, especially the ECB given its young experience. Indeed the standard toolbox of macroeconomics has proven to be inadequate at the very early stage of the crisis. Monetary policy seems to have emerged as a powerful instrument to resume economic activity at least in the US. Today central banks actions have significant consequences especially on money markets but even on capital markets as well. At the same time the efficiency of their actions depend on the monetary regime. This point can be illustrated by comparing FED and ECB decisions in the last 10 years.