Title: Monetary Policy Implementation in an Interbank Network: Effects on Systemic Risk

Speaker: Marcel Bluhm, 厦门大学王亚南经济研究院助理教授

Host: 董艳副教授 经济与管理研究院

Time: 2:30pm-4pm, Mar.21, Friday

Venue: 柳林校区通博楼111



Abstract: This paper makes a conceptual contribution to the effect of monetary policy on financial stability. We develop a microfounded network model with endogenous network formation to analyze the impact of central banks' monetary policy interventions on systemic risk. Banks choose their portfolio, including their borrowing and lending decisions on the interbank market, to maximize profit subject to regulatory constraints in an asset-liability framework. Systemic risk arises in the form of multiple bank defaults driven by common shock exposure on asset markets, direct contagion via the interbank market, and resale spirals. The central bank injects or withdraws liquidity on the interbank markets to achieve its desired interest rate target. A tension arises between the beneficial effects of stabilized interest rates and increased loan volume and the detrimental effects of higher risk taking incentives. We find that central bank supply of liquidity quite generally increases systemic risk.
About the speaker: Marcel Bluhm是厦门大学王亚南经济研究院助理教授，2011年获德国法兰克福大学经济学博士。研究领域为货币政策、经济增长、金融稳定性。关于他的研究论文和介绍，参见他的个人网页http://www.marcelbluhm.com。