Syllabus

Dates: Friday, April 11, 2025 – Monday, May 19, 2025

Starting Time: 1:00 pm

Guest Speaker: Maurizio Habib, Team Lead Economist at the European Central Bank

Participants: Students of the MSc in European Economy and Business Law and other academic programs

Length of Seminar:  Six 3-hr. seminar sessions, plus one 2-hr. exam session

Learning Objectives

The aim of the course is to provide students with an understanding of fundamental concepts that shape the international financial system and the functioning of the international monetary system. It will have predominantly a policy angle from the perspective of a practitioner working in a central bank. Particular attention will be devoted to issues that are currently debated by policymakers and financial analysts. It assumes that the students are familiar with basic notions of international economics.

Learning Outcomes

The course aims to provide students with the knowledge of concepts that are familiar to an international economist. Students are expected to learn how to analyse key international trends and understand their relevance for the global economy. It will be particularly useful for students who aim to apply for a position in central banks, international financial institutions (e.g. IMF, World Bank), European institutions, in the sell side of investment banks or continue their studies with a PhD in economics with an international angle. Students who want to increase their awareness of the complexity of the modern financial system and its international policy implications will certainly benefit from attending the course

Programme Description:

TOPIC I - Money, assets and central banks

The first module will introduce a number of basic concepts that are important for the understanding of the modern financial system, including institutional aspects. Functions of money. Central bank money and commercial bank money. Financial assets: short-term securities, bonds, stocks, derivatives. A brief history of central banking. Modern central banks: objectives, functions, and tools. Central banking in an international context. Other important financial investors active in cross-border activity.

TOPIC II – Key topics in international economics and financial integration

The second module will move into the realm of international economics and finance, introducing elements of theory and policy. The exchange rate, nominal, real and Purchasing Power Parity (PPP). Uncovered interest parity (UIP). Hedging currency risk. The balance of payments. Financial integration. The costs and benefits of financial openness. Anomalies in international finance: home bias. The drivers of capital flows: push and pull factors. How to deal with volatile capital flows.

TOPIC III – The international monetary system and the dominance of the US dollar

The aim of the third module is to illustrate the centrality of the dollar in the international monetary system and its implications for policymakers in advanced and emerging economies. The functions of money in an international context. A short history of international currencies. What makes an international currency. Search for safety and the accumulation of foreign exchange reserves. The convenience yield of US Treasuries and the safe asset conundrum. The dominant currency paradigm. The role of the US dollar in the propagation of the global financial crisis and the policy response at the international level. US dollar funding in the post-crisis period and deviations from covered interest parity. The cost and benefits of having an international currency. The relevance of the dollar for policymakers outside the United States. The global financial cycle and the propagation of shocks.

TOPIC IV – The future of the international monetary system

This fourth module will elaborate on the challenges to the current configuration of the international monetary system. Will the dollar lose its dominance? What are the perspectives for the euro? Can the renminbi become a leading international currency? What is the potential of digital currencies in the international monetary system? A taxonomy of digital currencies. Difference between central bank digital currencies, unbacked cryptos and stablecoins.

Speaker Info

Maurizio Michael Habib is Team Lead Economist at the European Central Bank (ECB). His research focuses on international macroeconomic and financial issues, including crypto-assets, investment funds, the global financial cycle and global safe assets. He has published in the Journal of International Economics, the Journal of International Money and Finance, the IMF Economic Review and International Finance, among others. He previously worked at the European Commission in Brussels and holds a MSc in economics from Birkbeck College in London and a Ph.D. in economics from the University of Rome “La Sapienza”.

Personal webpage (ECB website):

https://www.ecb.europa.eu/pub/research/authors/profiles/maurizio-michael-habib.en.html

Content

“The international financial and monetary system: from the dollar to cryptos”

Summary

The aim of the course is to provide students with an understanding of fundamental concepts that shape the international financial system and the functioning of the international monetary system. It will have predominantly a policy angle from the perspective of a practitioner with particular attention to current issues that are debated by policymakers and financial analysts. It assumes that the students are familiar with basic notions of international economics.

 Topics

The course will be structured along four modules: 1) Money, assets and central banks; 2) Key topics in international economics and financial integration; 3) The international monetary system and the dominance of the US dollar; 4) The future of the international monetary system.

1. Money, assets and central banks

   The first module will introduce a number of basic concepts that are important for the understanding of the modern financial system, including institutional aspects. Functions of money. Central bank money and commercial bank money. Financial assets: short-term securities, bonds, stocks, derivatives. A brief history of central banking. Modern central banks: objectives, functions, and tools. Central banking in an international context. Other important financial investors active in cross-border activity.

2. Key topics in international economics and financial integration

   The second module will move into the realm of international economics and finance, introducing elements of theory and policy. The exchange rate, nominal, real and Purchasing Power Parity (PPP). Uncovered interest parity (UIP). Hedging currency risk. The balance of payments. Financial integration. The costs and benefits of financial openness. Anomalies in international finance: home bias. The drivers of capital flows: push and pull factors. How to deal with volatile capital flows.

3. The international monetary system and the dominance of the US dollar

   The aim of the third module is to illustrate the centrality of the dollar in the international monetary system and its implications for policymakers in advanced and emerging economies. The functions of money in an international context. A short history of international currencies. What makes an international currency. Search for safety and the accumulation of foreign exchange reserves. The convenience yield of US Treasuries and the safe asset conundrum. The dominant currency paradigm. The role of the US dollar in the propagation of the global financial crisis and the policy response at the international level. US dollar funding in the post-crisis period and deviations from covered interest parity. The cost and benefits of having an international currency. The relevance of the dollar for policymakers outside the United States. The global financial cycle and the propagation of shocks.

4. The future of the international monetary system

   This fourth module will elaborate on the challenges to the current configuration of the international monetary system. Will the dollar lose its dominance? What are the perspectives for the euro? Can the renminbi become a leading international currency? What is the potential of digital currencies in the international monetary system? A taxonomy of digital currencies. Difference between central bank digital currencies, unbacked cryptos and stablecoins.

Timetable

Exam

Students may earn university credits for this activity if they attend at least 80% of the lectures and pass the final exam. Details about the exam date and the foreseen form of evaluation will be provided by the professor at the start of the seminar.