General Information
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“Study the past if you would define the future.”
– Confucius
Instructor Bio
Professor Célérier has award-winning teaching experience with both undergraduate and graduate students. Her research focuses on the role of financial institutions in the channeling of capital flows to firms and households, and their regulation, drawing on methods from behavioral finance to empirical economics, banking history to asset pricing, and spanning the areas of household finance, banking, and economic history. Her work has been published in top refereed academic journals, including the Quarterly Journal of Economics, and has raised the interest of several central banks and regulators in Canada around the world, such as the Bank of Canada, European Central Bank and the UK Financial Conduct Authority. Professor Célérier’s new research includes innovative interdisciplinary perspectives at the nexus of finance and history.
Target Audience
The course is particularly well-suited to anyone willing to gain general knowledge and historical perspectives on the functioning of financial institutions today, especially in Canada but also in the US and other countries. The material is accessible and general enough for all majors and backgrounds.
This course provides a solid understanding of financial markets and institutions that is essential for everyone whether as an individual – saving for your retirement or borrowing to buy a house – or as a manager who needs to interact with financial institutions to fund new projects. Financial institutions, including banks, capital markets, mutual funds and fintechs, play a central role in financing decisions that have long-lasting effects both on household wealth and on firm value. Therefore, it is crucial to understand the functioning of financial institutions and their regulatory environment, particularly in Canada but also in the US, in order to make optimal strategic and personal decisions.
Financial institutions, especially banks, operate in a unique manner that distinguishes them from other firms: they are prone to crisis, are regularly bailed out with taxpayers’ money, are subject to heavy regulation, serve as major transmission channel of monetary policy and macro-economic shocks, and their instability directly impacts economic growth. Therefore, this course would be of great interest to any student, including those contemplating a career in banking, as well as students seeking to gain general knowledge on the functioning of the economy as a whole.
Course Mission and Scope
The financial landscape is rapidly evolving as we face historically high levels of inflation, interest rates, and instability. Many of the topics covered in this class hold special relevance today. We delve into why banks are prone to crises, how financial institutions amplify or absorb economic shocks, how regulation limits the risks of banking crises, how monetary policy impacts growth and inequalities, and how central banks combat inflation. Examining these questions will provide you with a holistic view of finance, capital markets, and the role of financial institutions.
Earlier this year, Silicon Valley Bank collapsed following a typical bank run, reminiscent of the bank run depicted in the acclaimed 1946 film It’s a Wonderful Life. These types of panics were thought to belong to the era of Jimmy Stewart, yet they still occur in the 21st century. Less than 15 years after the Great Recession, we now face banking instability again, which threatens not only the financial sector but also the entire economy. Simultaneously, the US and Canadian central banks are grappling with inflationary pressures similar to those witnessed in the 1980s. Therefore, in this class, we will address the following question: What lessons can we learn from history, both recent and distant, that explain the bubbles, crashes, panics and crises we face today, and more generally the current design of our financial institutions?
This class combines economics and history to study the design of financial institutions, capital markets, and their regulation, with a special focus on Canada and the US. For each institution or market we will study, from banks to OTC markets, and including Central Banks, we will examine the economic rationale behind their design and regulation, as well as the historical and political context that shaped them. As a result, your knowledge will never become outdated because you will understand the rationale behind financial institutions and regulations, even as the financial system evolves. We will apply what we learn together through in class simulations – bank runs, bubbles and regulatory arbitrage – and discussions of real cases.
An enhanced understanding of the concepts covered in this course extends beyond banking and provides a deeper understanding of our rapidly changing macro environment and the implications of central bank policy. This knowledge has applications in general management, corporate strategy, entrepreneurship, as well as in individual investment or mortgage decision.
Evaluation and Grade Breakdown
| Component | Due Date | Weight |
|---|---|---|
| Class Participation | Ongoing | 20% |
| Class Presentation | Ongoing | 10% |
| Cases/Assignments | Ongoing | 40% |
| Final Exam | During Exam Period (April 15-26, 2024) | 30% |
Required Resources
A course package of readings and cases will be available. Professor Célérier has also developed several course notes which supplement reading material and are available through Quercus.