Macro Policy and Finance

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“There is a great need to understand why capital is hard to push towards countries with high-growth potential, and how asset prices and financial intermediaries influence real activity.”

Our core area of focus is financial intermediation, which is the mechanism through which capital is channeled to borrowing firms and households. Given the importance of capital as a factor of production, financial intermediation is intimately connected with both the level and volatility of economic growth. Excesses and disruptions in the intermediary process can have major impacts on a nation’s the economy.

The goal of the Macro Policy and Finance program is to focus on the theoretical and empirical understanding of how frictions in the intermediation process affect the real economy. Theoretically financial intermediation has two important roles to play: to promote global growth by channeling funds to countries where marginal product is highest and to reduce economic volatility by sharing risk across market participants.

The success of financial intermediation in achieving its objectives is mixed. Capital often flows in the wrong direction with high-growth emerging markets exporting capital to mature economies. Financial intermediation is often blamed for creating and amplifying economic volatility, let alone mollifying it. There is a great need to understand why capital is hard to push towards countries with high-growth potential, and how asset prices and financial intermediaries influence real activity. This group is dedicated to the pursuit of such questions.

Program DirectorAtif MianPrinceton University

Program Research Fellows:
Reza BaqirInternational Monetary Fund
Xavier GineThe World Bank
Hamza Ali Malik, State Bank of Pakistan
Shehzad Mian, Emory University
Stephen Redding, Princeton University
Javed Younas, American University of Sharjah
Bilal Zia, The World Bank