Macro, Money and Finance: A Continuous Time Framework
SeriesEconomics Lecture Series
SpeakerMarkus K. Brunnermeier (Princeton University)
June 13, 2016 until June 15, 2016
This Lecture focused on macroeconomic models with financial frictions in a continuous time setting. The financial sector diversifies idiosyncratic risk and creates (inside) money. The value of money is endogenous and adverse shocks that impair the balance sheet of the financial sector lead to disinflationary pressure a la Fisher. In addition to endogenous levels and flows, the risk dynamics is also endogenous, exhibiting tail risk and the volatility paradox. The welfare analysis addresses normative questions about the inefficiencies of financial crises and interaction between (redistributive) monetary policy and macro-prudential policy. Models on the build-up of imbalances in form of bubbles and international aspects are optional.