The University of Jordan - Faculty of Business Administration organized a Seminar on financial crises and international exchange rate arrangements on Thursday November 15, 2011. The seminar was one of the academic activity conducted at UJ under the umbrella and support of the WTO-Chair program and with coordination with UNCTAD’s Virtual Institute. The University of Jordan is a founding member in both the UNCTAD’s Virtual Institute and the WTO –Chair Programme. Under this programme, the WTO is providing annual financial support to the UJ for a period of four years to facilitate continuous interaction between the University and other national and international think-tanks. It provides financial support to the UJ and associated individual scholars towards their course preparation, teaching, research and outreach activities. This programme is part of the technical assistance and training programme that the WTO delivers, with a view to enhancing the quality and level of participation of developing countries in the multilateral trading system. As part of its research agenda, the WCP-UJ organizes international conferences on WTO-Trade related aspects, encourages and facilitates networking for the Arab researchers, engages in capacity building and also funds research.
The local coordinator of both programmes Prof. Taleb Awad from the Business Economic Department and Director of Economic Observatory at UJ invited UNCTAD ‘s Senior Economists Prof. Mahmoud A.T. Elkhafif , who is the Coordinator of UNCTAD’s Assistance to the Palestinian People and a Senior Economic Affairs Officer in the Division on Globalization and Development Strategies (DGDS). During his visit to the UJ, Dr. Elkhafif participated actively in two academic activities:
1- Seminar on International Financial Crises and the Future of International Exchange Rates Arrangements. The seminar was held under the patronage of the president of the University of Jordan and attended and opened by Professor Bashir Alzohby vice - President for Humanities. Also Prof. Musa Alouzi ; Dean Faculty of Business and professor Taleb Awad WTO-Chair holder made a speech in the opening ceremony. The seminar was also attended by faculty members from Business Economics, Finance, Business Administration, and Public Administration Departments and graduate and undergraduate students from the University of Jordan. Domestic media representatives and key officials from Ministry of Trade and Industry, Ministry of Finance, Central Bank, Association of Jordanian Banks and Amman Stock Market were invited.
2- Three hours Lectures for graduate students in both the PhD and Master programs in the Business Economic Department on topics related to international finance and globalization. Graduate students (38 students) from international finance, econometrics and Economic development courses attended the lectures together with Dr. Nahil Saqf Alheit, the department Chair Women and professors teaching the courses. The lectures materials together with relevant UNCTAD/WTO ’s publication were handed to the students to use it as they prepare for final examination.
The two activities were managed and directed by Prof. Taleb Awad ; VI’s coordinator and WTO-Chair holder.
The seminar and graduate lectures highlighted contemporary issues related to macroeconomic policies and financial crises based on last UNCTAD report on trade development including:
The post-crisis policy challenges in the world economy. It concludes that the recovery is slowing down and that the "two-speed recovery" is mainly the result of wide differences in domestic demand. In developing countries strong wage growth and sustained public support have prolonged the recovery in investment and domestic demand whereas in most developed economies private demand is subdued due to stagnating wages and little improvement in employment. The recent shift towards fiscal and monetary tightening represents a major risk for the global economy.
The discussion raised questions such as whether policymakers have drawn the lessons from the global financial and economic crisis. It shows that the widespread enthusiasm about system reform and supportive pro-growth macroeconomic policies when the crisis erupted has not lasted. Financial regulation reforms are progressing slowly and monetary system reform is limited.
Challenging the widespread re-orientation of macroeconomic policy, especially fiscal policy, towards austerity, the Report notes that fiscal imbalances were not a driving factor but a result of the crisis. Thus, fiscal retrenchment is not an appropriate response. Fiscal austerity seeking to cut fiscal deficits, curb public debt and thus "regain the confidence of the financial markets" is likely to be self defeating, as it affects GDP growth and reduces fiscal revenues.
It also addresses the main regulatory reforms that should take place in relation to financial markets. So far, the process of re-regulation of the financial systems has been slow and inadequate to cover the shadow banking system and to cope with a highly concentrated financial sector that is dominated by a small number of gigantic institutions. In general, the financial sector needs to be restructured in order to reduce the risk of mis-pricing and the resulting systemic crises. Reforms should mainly aim a clear separation between the activities of investment and commercial banking.
Financialization of commodity markets based on herd behavior significantly affects the prices of such basic goods as food staples and energy. Speakers proposed measures to increase transparency in physical and derivatives markets, putting in place an internationally coordinated tighter regulation of financial investors, and it was suggested that market surveillance authorities could be mandated to intervene directly.
Finally the two above mentioned activities underlined that the foreign exchange markets are disconnected from macroeconomic fundamentals. This disrupts the functioning of the real economy. Greater stability of the real exchange rate could be achieved by a system of rules-based managed floating. Such a system could be built on the adjustment of nominal exchange rates to inflation differentials or to interest rates differentials. This can be practiced as a unilateral, bilateral or strategy, but the greatest benefit for international financial stability would result if the rules for managed floating were applied at the multilateral level.