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Economists at the ̽��ֱ�� of Cambridge have joined forces with the New York-based Institute for New Economic Thinking (INET) to advance innovative approaches to understanding how our economy and the associated financial system really work.

In the context of financial contagion, persistent unemployment, rising inequality and intense pressure on government budgets, economists around the world recognize that conventional doctrines and models need to be reassessed. .

INET was created to facilitate this critical enquiry and broaden and accelerate the development of economic thinking that can lead to solutions for the great challenges of the 21st century.

̽��ֱ��Cambridge-INET Institute is being set up through a $ 3.75 million grant from the INET that has been matched 1:1 with funding from ̽��ֱ��Keynes Fund for Applied Economics, Mohammed El Erian, the Cambridge Endowment for Research in Finance, ̽��ֱ��Isaac Newton Trust�� and the Faculty of Economics..

Inaugural Director of Cambridge-INET, Professor Sanjeev Goyal, said: “Our Faculty members are at the forefront of new economic thinking about individual behaviour, the networks that shape economic exchange, the econometric analysis of financial markets, and the transmission mechanisms which relate the financial sector to the rest of the economy.”

He added: “ ̽��ֱ��support which went into the setting up of the institute – from INET itself and other matched funding�� – is recognition of the quality and importance of our research. It will help us to consolidate further the status of the Faculty as a leading centre for fundamental research in economics.”

̽��ֱ��Cambridge-INET will support doctoral research through PhD studentships, appoint a number of post-doctoral fellowships every year, host leading international economists, sponsor major conferences and provide seed funding for cutting-edge research projects.

̽��ֱ��Institute has four themes of research:

• Networks, crowds and markets: Facebook, Twitter, the World Wide Web, airline routing, British Rail and inter-bank loans are example of networks. What are the incentives to create and dissolve links? How do these networks shape economic performance? This theme is coordinated by Prof. Sanjeev Goyal.
• Transmission mechanisms and economic policy: There has been increasing interest in the study of the role of financial frictions and distortions in shaping the transmission of shocks and policies, and determining the level of demand and economic activity both within and across borders. This theme is coordinated by Prof. Giancarlo Corsetti (who is also Deputy Director of the Institute).
• Information, uncertainty and incentives: Economic phenomena arise out individual decisions. The�� research aims to deepen our understanding of risk-sharing, herding and crises in financial markets, and the incentives and efficiency of auctions and matching mechanisms. This theme is coordinated by Prof. Hamid Sabourian.
• Empirical Analysis of Financial Markets: Financial markets serve the important function of transferring risk across individuals and over time, and they provide information on the performance of firms and economies. So their effective performance is of great interest to policymakers, pension holders, and consumers, yet recent events have created profound mistrust about their operation. This theme is coordinated by Prof. Oliver Linton.

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