Online seminar series: Political economy of liquidity

Money and finance seminar series: The political economy of liquidity.
Online, October-December 2023.

The Columbia Center for Political Economy are running a webinar series on the political economy of liquidity hosted by Katharina Pistor (Columbia Law School) and Matthias Thiemann (Sciences Po).

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.” It will convene four times during the fall 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.


Monday, 18 September 2023, 12:10-1:40 pm ET

The history of finance is often described as a history of financial crises. How to manage financial crises is of major importance for private actors, policy makers and regulators alike. Often two extremes are pitched against one another: the capacity of private actors to self-govern their liquidity on the one, and the importance of crisis avoidance through external liquidity management, on the other. Both private and public actors face the additional challenge of how much effort to devote to ex ante vs. ex post governance. The question this session seeks to understand how private and public actors manage liquidity, how different institutional configurations affect liquidity management, and how this affects the overall stability of the financial system.

Discussants: Charles Calomiris and Noémie Pinardon-Touati

Charles Calomiris is the University of Austin Texas’s Dean of the Center for Economics, Politics, and History. Prior to joining UATX, Calomiris served as the Henry Kaufman Professor of Financial Institutions at Columbia Business School and a Professor of International and Public Affairs at Columbia’s School of International and Public Affairs. His research interests include the comparative development of banking and finance.

Noémie Pinardon-Touati is Assistant Professor in the Economics Department at Columbia University. Her research lies at the intersection of finance, applied macroeconomics, and public economics, including the interplay between government intervention and corporate financial and real behavior, at the micro and macro levels.


Session 2: Financial innovation and liquidity management

Monday, 23 October 2023, 12:10-1:40 pm ET

In finance, illiquidity (not insolvency) is the binding constraint, as liquid can turn into illiquid assets overnight. Few assets are reliably liquid and these are public (state money), not private (credit money). This poses challenges for monetary policy, as the implications of financial innovation for price stability usually reveal themselves only when markets turn and liquid assets become illiquid, creating runs on intermediaries and markets that can destabilize the financial system. This session explores the relation between financial innovation and liquidity management, the winners and losers of this interplay and the contextual factors, such as the willingness of public authorities to tolerate new forms of liquidity creation and private liquidity management.

Discussants: Richard H. Clarida and Samuel Knafo

Richard H. Clarida is the C. Lowell Harriss Professor of Economics and Professor of International and Public Affairs and former Vice Chair of the Federal Reserve. He researches on dynamic stochastic general equilibrium theory and international monetary economics. He served as the 21st Vice Chair of the Federal Reserve from 2018 to 2022.

Samuel Knafo is Reader and Lecturer in International Relations at Sussex University. His work encompasses the global political economy and finance, social history of financialization, managerialism, public management, shareholder value, varieties of capitalism, monetary policy.


Session 3: Monetary sovereignty and the elasticity of liquidity

Monday, 13 November 2023, 12:10-1:40 pm ET

Monetary sovereignty is a function of the elasticity of the money supply. Only states that issue their own currency as well as most of their debt in that currency and under their own laws are fully monetarily sovereign such that they can rescue themselves in times of crisis. In contrast, states that relinquish their own currency or issue their sovereign debt in foreign currency and/or under foreign law must seek help from others: the IMF, other (more) sovereign countries, and their private creditors. Even countries that are fully sovereign in this sense can see their hands tied by private sector liquidity creation, as the need for stabilizing the financial system through QE for example, often takes precedence over other policy goals. This session explores how the state’s capacity and willingness to effectively manage liquidity affects its external (geopolitical) standing as well as the internal (domestic) allocation of power and resources.

Discussants: Viral V. Acharya and Charlotte Rommerskirchen

Viral V. Acharya is the C.V. Starr Professor of Economics in the Department of Finance at New York University Stern School of Business (NYU-Stern) and a former Deputy Governor at the Reserve Bank of India (RBI). His primary research interest is in theoretical and empirical analysis of systemic risk of the financial sector.

Charlotte Rommerskirchen is a Senior Lecturer in International Political Economy at the University of Edinburgh. Her research and teaching focus on the politics of sovereign debt, as well as the global political economy more broadly.


Session 4: Monetary backstopping: De-risking or risk shifting

Monday, 4 December 2023, 12:10 – 1:40 pm ET

In recent years, the old orthodoxy of a clear separation between markets and states has given way to state policies that seek to leave decision making with private actors with the state nudging, insuring (ex ante), or backstopping (ex post) them by absorbing the risk private actors are unwilling or unable to take. Examples include private-public partnership (PPPs), environmental policies to encourage investments in green technologies, and monetary policies aimed at crisis prevention. These public policies have earned the label “de–risking”, a term that creates the illusion of a win-win situation, in which efficient markets do their bidding with the state only lending a helping hand. Yet, risk cannot be purged from them but inevitably is shifted to others. This session explores the backstopping policies the leading central banks have developed since the Great Financial Crisis of 2008 and their effects on the structure of financial markets and the distribution of wealth.

Discussants: Daniela Gabor and Martín Guzmán

Daniela Gabor is Professor of Economics and Macrofinance as UWE Bristol (UK) and currently a member of the Institute for Advanced Studies at Princeton University. Her research includes critical central banking, collateral intermediation, shadow banking, IMF, capital controls, transnational banking.

Martín Guzmán is Professor of Economics at Columbia University (SIPA) and the former Minister of Economy of the Republic of Argentina. His research focuses on the emergence, propagation, and resolution of macroeconomic disequilibria, monetary economics, and economic development.



Registrants will receive a Zoom link for each of the seminar sessions they have chosen to attend. The link(s) will be shared via email following registration.