Monetary Policy & Financial Stability
The objective of the research area “Monetary Policy and Financial Stability” is to study developments in macroeconomics and finance that affect the stability of financial markets and that are of relevance to policy makers, regulators and financial institutions. Research projects employ state-of-the-art techniques and should lead to publications in academic journals as well as practice-oriented policy outlets. In addition, the area fosters interaction and collaboration between researchers, central bankers, practitioners and leading international experts via conferences, roundtables and seminars.
Systemic risks and banks: In this project an intertemporal agent based model is set up to investigate financial stability and the emergence of systemic risk along several dimensions. In addition, the model will be used to investigate to what extent the stability of the financial system can be enhanced through adequately designed macroprudential regulatory measures. Collaborators are the CFS Fellows Marcel Bluhm, Assistant Professor of Economics at the Wang Yanan Institute for Studies in Economics (WISE) in Xiamen, P.R. China and Ester Faia, PhD, Profesor of Monetary Economics at Goethe University.
Uncertainty and Risks in Financial Markets: In this project, the properties of the so-called second order risk model (Knightian uncertainty) are studied. By means of experimental (laboratory) studies the determinants of ambiguity aversion and their impact on pricing are analyzed. Collaborators are CFS Fellow Peter Ockenfels, Professor of Economics (h.c.) at Goethe University and Christian Wilde, Assistant Professor in GU’s Finance department.
Compensation in Investment Banking: This project aims at developing testable hypotheses on compensation in investment banking. The project tries to find an economic explanation for the steep wage schedule observed in the trading arm of this industry. Collaborators in the first project are CFS Fellows Reinhardt Schmidt and Marti Subrahmanyam, Professors of Finance at Goethe and New York University, respectively and CFS research assistant Marcus Fleig. CFS Fellow Marcel Tyrell, Professor of Finance at Zeppelin University is a collaborator for the second project.
Research Agenda 2014 - 2015
- Trading and banking
- Bail-In and bailouts: lessons from the financial crisis
- Pricing of systemic risk in banking
- Real sector bank credit: Sustainable driver of GDP?
- Interest rate elasticity and credit cycles: Is counter-cyclical monetary policy effective?