Research seminar by Nobuhiro Kiyotaki (Princeton University): «Financial Crises, Bank Risk Exposure and Government Financial Policy»

On Thursday, November 24International College of Economics and Finance held Research seminar.
Speaker: Nobuhiro Kiyotaki (Princeton University) 
Theme: «Financial Crises, Bank Risk Exposure and Government Financial Policy», joint with Mark Gertler and Albert Queralto
Venue: Pokrovski Bulvar, 11, Room Zh-822

Abstact: A macroeconomic model with financial intermediation is developed in which the intermediaries (banks) can issue outside equity as well as short term debt. This makes bank risk exposure an endogenous choice. The goal is to have a model that can not only capture a crisis when banks are highly vulnerable to risk, but can also account for why banks adopt such a risky balance sheet in the first place. We use the model to assess quantitatively how perceptions of fundamental risk and of government credit policy in a crisis affect the vulnerability of the financial system ex ante. We also study the effects of macro-prudential policies designed to offset the incentives for risk-taking.