The Baker Institute International Economics Program studies many key issues in global economic policy, as well as domestic macroeconomic and developmental policy in foreign countries. Between debt concerns in Europe threatening another global financial crisis and the ascendancy of emerging economies, best typified by China becoming the world’s second-largest economy, the shape and dynamics of the global economy and its governance are undergoing significant shifts. Baker Institute researchers study the role of financial imbalances in recent and potential crises, with the intent of proposing alternative mechanisms for correcting these imbalances and reducing the tight financial coupling of global markets that leads to contagion and systemic risk. The program sponsors speakers and events that examine how global economic trends are developing, and what policies can optimally address the challenges that arise.
Baker Institute researchers have a particular expertise in emerging markets. Among other areas of study, they explore how emerging economies maintain macroeconomic stability while integrating their capital markets with the outside world. The issue is crucial because global investors are increasingly putting money into emerging economies, especially debt instruments. Consequently, recipient economies have adopted a variety of approaches to debt flows. This diversity highlights the uncertainty among policymakers and economists about the benefits and risks of foreign capital. Managing exchange-rate regimes — a complicated balance of domestic and external conditions — add another dimension to the equation. The International Economics Program focuses on capital account management — the degree of a country’s openness to foreign flows, the types of flows, and appropriate exchange rate and macroprudential policies.
With expertise on mobile banking in India and microfinance in the Arab world, the International Economics Program also seeks to examine innovative financial tools that promote inclusive growth. Baker Institute researchers are developing microfinance models that borrow lower appetites for risk from the mutualization movement and that support the growth of a stable middle class in developing countries. The institute’s long-term goal is to educate developing nations about financial structures and management, as well as to encourage the development of civil societies and foster international cooperation.