How do financial globalization and monetary policies interact? This proposal studies the international transmission channels of monetary policy from the main financial centres to the rest of the world and the ability of countries to conduct independent monetary policy in a financially integrated world. I focus in particular on the role of different exchange rate regimes and on the implications of large cross border financial flows for monetary policy transmission. The proposal is organized around four related parts: (i) global financial conditions and monetary policy; (ii) central banking in large capital flow environments; (iii) heterogeneous financial intermediaries and monetary policy; and (iv) the structure of the international monetary system. In the first part, I will use cutting-edge empirical methods to characterize the effect of monetary policy conducted in main financial centres on the global financial cycle, with a special focus on the role of financial intermediaries in channelling liquidity across borders. In the second part, I will use high frequency data on financial markets to assess to what extent the inflation targeting open economies can have an independent monetary policy in the presence of international capital flows and induced credit creation. In the third part, I will develop new theoretical modelling of the monetary policy transmission mechanism where heterogeneity in financial intermediation plays a key role. This novel framework will allow me to study in general equilibrium the interplay between the effect of monetary policy on investment and aggregate demand and the endogenous build-up of macroeconomic risk. I will then extend the model to the open economy. Finally, I will propose a new model of the workings of the international monetary system based on the insurance properties of the reserve currency and asymmetric fiscal capacities. This micro-founded model will allow me to consider multipolar systems versus a dollar-centric

Student in first year of training, no project summary at this stage of the programme

The modern financial system has undergone immense transformation in recent years and is far more complex than ever before. In lockstep, financial regulation has also become more complex. This research proposal attempts to improve our understanding of potential drivers of this complexity and the implications of this change on the allocation of resources. Taking a positive rather than a normative approach, I will analyse post-crisis changes at both the micro- and at the macro-levels to create a broader understanding of complexities in the current financial system. In order to do so, I will employ a set of advanced research designs, as well as a uniquely assembled micro-level dataset covering state and privately owned financial institutions in Asia, Africa, South America and Europe. This project will focus on two interconnected areas of research: 1) Organisation of Credit, 2) Financial regulation in a complex environment. The aim of this project is to create a sustainable framework for the study of post-crisis financial systems, and to shape the current debate on the future of post-crisis financial structures and the development of policy in this area. Not only will this research have a considerable impact on our understanding of financial systems, it will also impact fields beyond finance, like Organisational Economics, Industrial Organisation and Development Economics.