ICEF Research Seminar (JM) by Sylvain Carré (Ecole Polytechnique Federale de Lausanne)

On Friday, February 8 ICEF held the Research Seminar (JM)

Speaker: Sylvain Carré (Ecole Polytechnique Federale de Lausanne)
Theme: "Disclosures, Rollover Risk, and Debt Runs"

Abstract: Procedures such as stress tests increase the transparency of the financial system by dampening information asymmetries between banks and the regulator. Is this transparency desirable? How should the regulator disclose information to the public? I construct a model of dynamic debt runs to answer these questions. I map the bank’s funding costs to the degree of transparency and the regulatory disclosure regime; and I find that (i) in terms of run likelihood and efficiency, opacity is desirable if and only if fundamentals are strong, (ii) transparency can be more efficient even when it entails more runs, (iii) the regulator should commit to disclosure only at high levels of transparency.

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ICEF seminars