ICEF Associate Professor Udara Peiris will give a lecture at the Central Bank of the Russian Federation on November 15 at 4 pm.
Topic: “Liquidity, Default and The Interaction of Financial Stability and Monetary Policy”
Abstract: Liquidity and default are inherently intertwined for the most interesting and important aspects of financial stability issues. Credit risk affects the ease with which economic agents/institutions can raise funds to meet their liquidity needs, and market illiquidity can exacerbate solvency concerns.The Goodhart-Tsomocos model, based on the canonical general equilibrium with incomplete markets model, provides for the contemporaneous assessment of both liquidity and default within a framework of missing financial markets, multiple currencies, heterogeneous economic actors (i.e., investors, firms and intermediaries) and multiple externalities. Within this framework, the complementarity and substitutability of regulatory and monetary policies can be identified and dissected. The optimal policy mix may be subsequently determined given the objectives of the fiscal and monetary authorities.