Financial System

This course studies how the financial system works to support economic growth most of the times and how it gets into a crisis occasionally and puts the economy into a recession. We examine recent papers in economics that tackle these questions theoretically and empirically. The course emphasizes the importance of the informational and incentive problems inherent in financial transactions. The financial system consists of various mechanisms to mitigate those problems but the mechanisms are not perfect and sometimes fail. We also discuss recent developments in financial regulation that tries to support well functioning financial system.

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授業計画

We start by studying a basic model of financial intermediation with asymmetric information. The model reveals why financial system is prone to crisis and what can be done to reduce vulnerability. We also review the global financial crisis of 2007-2009 and its aftermath and derive some lessons. After we survey some recent research on financial intermediation and financial regulation, we examine recent trends in financial regulation, especially in Japan.

授業の方法

Lectures, but students are encouraged to participate actively by asking questions and joining discussion.

成績評価方法

Two take-home exams and class participation.

教科書

Allen, Franklin, and Douglas Gale (2007). Understanding Financial Crises. Oxford University Press. Kenneth R. French, Martin N. Baily, John Y. Campbell, John H. Cochrane, Douglas W. Diamond, Darrell Duffie, Anil K. Kashyap, Frederic S. Mishkin, Raghuram G. Rajan, David S. Scharfstein, Robert J. Shiller, Hyun Song Shin, Matthew J. Slaughter, Jeremy C. Stein, René M. Stulz (2010). The Squam Lake Report: Fixing the Financial System, Princeton University Press. Bank of Japan (2019). Financial System Report. World Bank (2019). Bank Regulation and Supervision a Decade after the Global Financial Crisis. Global Financial Development Report 2019/2020. Other papers are posted on ITC-LMS.

参考書

Will be posted on ITC-LMS.

履修上の注意

Basic knowledge in graduate level microeconomics, macroeconomics, and econometrics is assumed.