Magdalena Rola-Janicka awarded 2020 Best Job Market Paper in Finance Theory
Every year since 2011, the Finance Theory Group awards prizes for the best theory papers on the finance job market. The annual award is granted by a dedicated award committee consisting of several members of the group. It is a highly prestigious award confirming academic excellence, many of the winners are from world's top universities in economics and finance.
This year, two paper won the 1st award: 'The Political Economy of Prudential Regulation' by PhD student Magdalena Rola-Janicka and 'Multinational Banks and Financial Stability' by Christopher Clayton (Yale University, United States) Andreas Schaab (Harvard University, United States). Past winners can be found here.
Magdalena is an alumna of Tinbergen Institute's Research Master's Program and will defend her thesis this winter at the University of Amsterdam, supervised by research fellow Enrico Perotti. In September 2020, Magdalena started a six-year tenure track Assistant Professor position at the Department of Finance, Tilburg University. Her research interest are in banking, macro-finance and political economy.
Abstract
This paper studies the equilibrium level of prudential regulation in a framework with negative borrowing externalities. A debt limit is implemented by a politician appointed through majoritarian elections. If she is committed to perfect enforcement, voting allows borrowers to internalize the externality. If politician is captured, she exempts politically connected borrowers from regulation (imperfect enforcement), distorting voters' policy preferences. Depending on the electoral power of the connected borrowers, the outcome may be an either too lax or too strict policy. Additional results highlight the impact of income inequality on the strictness of prudential regulation