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UID:23f7234b8990d7a15e061e4801cfe926
CATEGORIES:Seminars
CREATED:20170418T181542
SUMMARY:Lunch Seminar: Andrea Prestipino - FRB
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Anticipated Banking Panics (with Mark Gertler and Nobu Kiyotaki)\nAbstract:
 \n We develop a macroeconomic model with banking instability. Sunspot runs 
 can arise that are harmful to the economy. However, whether a run equilibri
 um exists depends on fundamentals. In contrast to earlier work, the probabi
 lity of a sunspot run is the outcome of rational forecast based on fundamen
 tals. The model captures the movement from slow to fast runs that was a fea
 ture of the Great Recession: A weakening of banks’ balance sheets increases
  the probability of a run, leading depositors to withdraw funds from banks.
  These slow runs have harmful effects on the economy and set the stage for 
 fast runs. We then turn to study optimal leverage restrictions in this setu
 p. The optimal policy corrects both traditional pecuniary externalities and
  a new type of externality arising from agents’ failure to factor in the ef
 fect of their leverage choices on the probability of a systemic run. We stu
 dy the interaction and relative quantitative importance of pecuniary extern
 alities and this “run externality”.\n
DTSTAMP:20260406T181044Z
DTSTART:20160706T130000Z
DTEND:20160706T140000Z
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