A partnership with academia

Building knowledge for trade and development

NEWS

The University of Jordan joined UNCTAD's Ugo Panizza for a presentation of the Trade and Development Report 2009 on December 15. Professors, students, representatives from the private sector, the chamber of commerce, and the chamber of industry, were especially interested in discussing the implications of the global financial crisis for their country and region.

The conference was moderated by Talib Awad, Vi member coordinator at the University of Jordan, and Vi's Piergiuseppe Fortunato.

During his presentation, Panizza, of the Division on Globalization and Development Strategies (GDS), described the emergence of the global financial crisis, the role of financial institutions, and the lessons for financial regulation.

He emphasized that poor financial regulation had led to bubbles in the financial markets that eventually burst, leading to repercussions on the real economy.

Panizza explained that all financial crises share common elements and follow certain mechanisms, but still have to be treated with different instruments. As financial regulation is always tailored to the circumstances of the previous crisis, and past policies were based on a number of assumptions that have to be considered wrong in retrospective, financial markets are in need of effective regulation in order to avoid future crises.

Citing James Tobin's ideas, Panizza said that a comprehensive definition of financial efficiency should include:

  • information arbitrage efficiency
  • fundamental valuation efficiency
  • full insurance efficiency
  • transactional efficiency, and
  • function efficiency

Regarding a reform of the international financial system, he said that market-based regulation should be avoided -- regulation should effectively impede regulatory arbitrage and moral hazards in the banking system; and  should not focus solely on banks but on the whole financial system.

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