Can Globalisation Benefit All? Research Project

Managing Supercycles: Globalisation and Institutional Change

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Principal Investigator: Professor Daniela Gabor

Daniela Gabor is Professor of Economics and Macrofinance at the University of the West of England (UWE), and obtained a PhD in Banking and Finance in 2009 from the University of Stirling.

Her research develops three related themes under the umbrella of critical macro finance. First, shadow banking activities, in particular repo markets, and the implications for monetary theory, central banking, sovereign bond markets and regulatory activity. Second, her research develops the theme of transnational banks’ involvement in policy deliberations around capital controls and crisis management in both global settings and in emerging markets. Finally, she research the IMF’s conditionality and advice on capital controls.

Co-Investigators: Yannis Dafermos (UWE Bristol) and Jo Michell (UWE Bristol)

Project Summary

Our Institutional Supercycles projects explores a ‘third’ cycle in macroeconomics that has a longer horizon than the standard business and financial cycles, and is anchored in institutional and ideational struggles. Drawing on Minsky, we define institutional supercycles as long-run process of institutional change over which the effectiveness of institutional structures that aim to stabilise the macrofinancial system – Minsky’s thwarting mechanisms - wax and wane as private sector innovation and political struggles erode their effectiveness. 

 

In the first project paper, we explore the evolving architecture of thwarting mechanisms over two supercycles in the post-war period: Industrial Capitalism and Financial Globalisation. We capture the changing effectiveness of thwarting mechanisms through a Macrofinancial Stability Index (MSI), and zoom in on the role that shadow banking played in eroding the thwarting mechanisms of the financial globalisation supercycle.

 

In paper 2, we identify two possible scenarios for the potential emergence of a ‘green’ supercycle: the Wall Street Climate Consensus, and a Green New Deal. In the former, financial profitability is maintained by promoting the creation of ostensibly ‘green’ asset classes, and market ‘solutions’ to the climate crisis. In the latter, a significant redistribution of power away from global finance, alongside the adoption of  thwarting mechanisms that tackle the climate crisis and social crisis simultaneously, leads to a more significant and direct role for the state.

 

In paper 3, we examine in further detail the growing importance of global shadow banks, which we term neorentiers, to capture their specific institutional footprint during the ‘genesis’ period of the dollar-dominated financial globalisation supercycle. We place special emphasis on two markets critical to the global dollar footprint: derivatives (FX swaps) and repo markets, and explore the rise of new thwarting mechanisms specifically aimed at containing the evolving macrofinancial instabilities generated by neorentiers.
 

Results

Blogs:

Working Paper:

Institutional Supercycles: An Evolutionary Macro-Finance Approach

Yannis Dafermos, Daniela Gabor, and Jo Michell  | July 30, 2020

 

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