The Global Financial System

3 Credits · Level: Graduate

The evolution of the global financial system can be understood as a series of regime changes that have profoundly changed the global economy. In this class we will study these regime changes, beginning with the post-WW2 establishment of the Bretton Woods system that enshrined the US dollar as the world's global reserve currency. We will study the historical evolution of the global financial system passing through the following regimes and the crisis that led to their transformations. The high inflation period of the late 60's/70s that led to the depegging of USD from gold and the end of Bretton Woods system. The financial globalization of the 1990's, leading to a period of financial crisis in emerging market economies, and the period of "global imbalances". The rise of China as a financial superpower, leading to the world-wide credit and real estate bubbles that led to the Great Financial Crisis of 2008. The "secular stagnation" post-crisis period of low inflation/growth/interest rates with rising inequality, partially caused by a combination of fiscal austerity with monetary heterodoxy. The post-pandemic surge in global inflation in a period of deglobalization, geopolitical uncertainty and China-US competition. The class will have a specific China-centered module looking at the functioning of the Chinese economy since the start of the reform period in 1978. Another parallel theme is the evolving role of the USD as the global reserve currency and how US monetary policy impacts the global economy. Students will develop a detailed knowledge of the policy and financial characteristics of the global financial system, especially how the rise of China is challenging global US financial hegemony since the 2008 crisis. Students will have the option of writing a term paper or a midterm exam, alongside a final class exam.