Angewandte Wirtschaftsforschung 4: Advanced Topics in Empirical Macroeconomics: Systemic Risk and Shadow Banking
Shadow banking, in particular securitization of US subprime mortgage loans, has played a crucial role in the creation of the Great Financial Crisis. At this time, financial market participants, blinded by supposedly good credit ratings, neglected essential parts of risk that arose from non-traditional banking \citep{Gennaioli2012}. This relates to the question about an optimal degree of diversification, as diversification can decrease the idiosyncratic risk for a single entity, but increase the (underestimated) systemic risk through stronger connectivity \citep{Wagner2010}. The objective of this seminar is to give information about systemic risks and shadow banking. Students will learn these concepts with the aide of a reference paper. In a first part of their seminar paper, they should reflect the essential statements in the reference paper in their own words, present its contributions to the literature and identify strengths and weaknesses in the methodology applied. In a second part of the paper, students will compare the dynamics described in the reference paper with recent empirical findings of an economy of their choice. As a basis for the latter can serve financial market stability reports from central banks. After successful completion of the course, students should be able to approach the related academic literature as well as current policy debates.
Shadow banking, in particular securitization of US subprime mortgage loans, has played a crucial role in the creation of the Great Financial Crisis. At this time, financial market participants, blinded by supposedly good credit ratings, neglected essential parts of risk that arose from non-traditional banking \citep{Gennaioli2012}. This relates to the question about an optimal degree of diversification, as diversification can decrease the idiosyncratic risk for a single entity, but increase the (underestimated) systemic risk through stronger connectivity \citep{Wagner2010}. The objective of this seminar is to give information about systemic risks and shadow banking. Students will learn these concepts with the aide of a reference paper. In a first part of their seminar paper, they should reflect the essential statements in the reference paper in their own words, present its contributions to the literature and identify strengths and weaknesses in the methodology applied. In a second part of the paper, students will compare the dynamics described in the reference paper with recent empirical findings of an economy of their choice. As a basis for the latter can serve financial market stability reports from central banks. After successful completion of the course, students should be able to approach the related academic literature as well as current policy debates.
Semester: 2019/20 Wintersemester