Economics Webinar - Financial Frictions: Macro vs Micro Volatility

4:00pm - 5:30pm
Zoom Meeting ID: 968 790 9998 (password 21846405)

We introduce frictional financial intermediation into a HANK model. Households are subject to idiosyncratic and aggregate risk and smooth consumption through savings and consumer loans intermediated by banks. The banking friction introduces an endogenous countercyclical spread between the interest rate on savings and on loans. This interacts with incomplete markets because borrowers and savers face different intertemporal prices, and induces a time-varying mass point of high MPC households. Aggregate shocks through their impact on the spread give rise to consumption inequality. We show this mechanism to be empirically relevant. Ex-ante macro prudential regulation reduces welfare by reducing consumption smoothing.

Event Format
Speakers / Performers:
Prof. Ralph Luetticke
University College London

https://www.ralphluetticke.com/

Language
English
Recommended For
Alumni
Faculty and staff
PG students
Organizer
Department of Economics
Contact

Julie Wong by email: fnjuwong@ust.hk

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