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Session 1: Banks and Financial Frictions

July 1-2, 2019 | Landau Economics Bldg, 579 Serra Mall, Rm 134, Stanford

This session will feature post-crisis research on the central role of banks in the economy, their incentives for risk-taking, developments in fintech, the role of banks for financial stability and payments provision, and the importance of financial frictions for households and firms more generally.

Organizers: Juliane Begenau (Stanford Graduate School of Business), Lars Peter Hansen (University of Chicago) and Monika Piazzesi (Stanford)
Poster Session Co-Sponsor: Macro Finance Research Program of the Becker Friedman Institute

In this Session

Jul 1 | 8:30 am to 9:00 am

Check-in | Breakfast

Jul 1 | 9:00 am to 10:00 am

Credit Cycles with Market Based Household Leverage

Presented by: Tim Landvoigt (The Wharton School, University of Pennsylvania)
Co-Author(s): William Diamond (The Wharton School, University of Pennsylvania)

We develop a model in which mortgage leverage available to households depends on the risk bearing capacity of financial intermediaries. Our model features a novel transmission mechanism from Wall Street to Main Street, as borrower households choose lower leverage and consumption when intermediaries are distressed. The model has financially constrained young and unconstrained middle-aged households in overlapping generations. Young households choose higher leverage and riskier mortgages than the middle-aged, and their consumption is particularly sensitive to credit supply. Relative to a standard model with exogenous credit constraints, the
macroeconomic importance of intermediary net worth is magnified through its effects on household leverage, house prices, and consumption demand. The model quantitatively demonstrates how recessions with housing crises differ from those driven only by productivity, and how a growing demand for safe assets replicates many features of the 2000s credit boom and increases the severity of future financial crises.

Jul 1 | 10:00 am to 10:15 am

Break

Jul 1 | 10:15 am to 11:15 am

Agency Conflicts and Public Pension Fund Investments into Alternatives

Presented by: Juliane Begenau (Stanford Graduate School of Business)
Jul 1 | 11:15 am to 11:30 am

Break

Jul 1 | 11:30 am to 12:30 pm

Bank Market Power and Monetary Policy Transmission

Presented by: Toni Whited (University of Michigan Ross School of Business)
Jul 1 | 12:30 pm to 1:30 pm

Lunch and PhD Student Posters

Presented by: Poster session is co-sponsored by Macro Finance Research Program (https://bfi.uchicago.edu/programs/macro-finance-research-program/)
Jul 1 | 1:30 pm to 2:30 pm

Do Credit Conditions Move House Prices?

Presented by: Dan Greenwald (MIT Sloan School of Management) and Adam Guren (Boston University)
Jul 1 | 2:30 pm to 2:45 pm

Break

Jul 1 | 2:45 pm to 3:45 pm

Money and Banking in a New Keynesian Model

Presented by: Monika Piazzesi (Stanford University)
Co-Author(s): Ciaran Rogers (Stanford University) and Martin Schneider (Stanford University)
Jul 1 | 3:45 pm to 4:00 pm

Break

Jul 1 | 4:00 pm to 5:00 pm

Leverage Regulation and Market Structure: A Structural Model of the UK Mortgage Market

Presented by: Matteo Benetton (UC Berkeley Haas School of Business)
Jul 1 | 5:30 pm to 6:00 pm

Drinks

Jul 1 | 6:00 pm

BBQ

Jul 2 | 8:30 am to 9:00 am

Breakfast

Jul 2 | 9:00 am to 10:00 am

Financial Heterogeneity and the Investment Channel of Monetary Policy

Presented by: Thomas Winberry (University of Chicago Booth School of Business)
Jul 2 | 10:00 am to 10:15 am

Break

Jul 2 | 10:15 am to 11:15 am

International Spillovers and Local Credit Cycles

Presented by: Sebnem Kalemli-Ozcan (University of Maryland)
Jul 2 | 11:15 am to 11:30 am

Break

Jul 2 | 11:30 am to 12:30 pm

Pricing Uncertainty Induced by Climate Change

Presented by: Lars Peter Hansen (University of Chicago)
Co-Author(s): William A. Brock (University of Wisconsin–Madison) and Michael Barnett (University of Chicago)
Jul 2 | 12:30 pm to 1:30 pm

Lunch

Jul 2 | 1:30 pm to 2:30 pm

On the Scale of Financial Intermediaries

Presented by: Nina Boyarchenko (Federal Reserve Bank of New York)
Jul 2 | 2:30 pm to 2:45 pm

Break

Jul 2 | 2:45 pm to 3:45 pm

Who Bears the Welfare Costs of Monopoly? The case of the Credit Card Industry

Presented by: Kyle Herkenhoff (University of Minnesota, Twin-Cities)
Co-Author(s): Gajendran Raveendranathan (McMaster University)

How are the welfare costs from monopoly distributed across U.S. households? We answer this question for the U.S. credit card industry which is highly concentrated, charges interest rates that are 3.4 to 8.8 percentage points above competitive pricing, and has repeatedly lost antitrust lawsuits. We depart from existing competitive models by integrating oligopolistic lenders into a heterogeneous agent, defaultable debt framework. Our model accounts for half of the spreads and excess profits observed in the data. The welfare gain from competitive reform in the credit card industry is equivalent to a one-time transfer worth 3.4 percent of GDP. Along the transition path, all cohorts realize welfare gains from competitive reform. Poor households benefit the most from increased consumption smoothing, while rich households also benefit from higher general equilibrium saving interest rates

Jul 2 | 3:45 pm to 4:00 pm

Break

Jul 2 | 4:00 pm to 5:00 pm

Aggregate Information Dynamics

Presented by: Gary Gorton (Yale School of Management)