Wednesday 21 October 2020

• Speaker: Dr Linda Schilling, Ecole Polytechnique
• Time: 2.45pm to 3.45pm

Title: Central Bank Digital Currency: When price and bank stability collide (joint with: Jesus Fernandez-Villaverde, Daniel Sanches and Harald Uhlig)

Abstract: An account-based central bank digital currency or CBDC may provide to be an attractive alternative to traditional demand-deposits in private banks. With that, the central bank needs to confront its role in the classic banking issues of financial intermediation, maturity transformation and demand-liquidity or 'spending' shocks by its private customers.

We analyze these issues in a nominal version of a Diamond and Dybvig (1983) model, with an additional and exogenous price stability objective for the central bank. While the central bank can always deliver on its nominal obligations, runs can nonetheless occur, manifesting themselves either as excessive real asset liquidation or as a failure to maintain price stability.

We demonstrate a CBDC Trilemma: of the three goals efficiency, financial stability (i.e. absence of runs) and price stability, the central bank can achieve at most two. We discuss how the analysis applies to a token-based CBDC, a hybrid CBDC and physical cash as well, with appropriate caveats.

Wednesday 4th November 2020

• Speaker: Dr Jan Zapal, CERGE-EI

• Time: 14.45-15.45

Title: Sequential Vote Buying (Joint with: Ying Chen: Johns Hopkins University)

Abstract: To enact a policy, a leader needs votes from committee members with heterogeneous opposition intensities. She sequentially offers transfers in exchange for votes. The transfers are either promises paid only if the policy is put to a vote or paid up front. With transfer promises, the leader buys the votes of those least opposed at a cost near zero.

With up-front payments, she does not necessarily buy the votes of those least opposed, and a vote can cost significantly more than zero. The leader is better off with up-front payments. We discuss several extensions including private histories and simultaneous offers.

Wednesday 11 November 2020

• Speaker: Dr Hans Sievertsen, University of Bristol
• Time: 2.45pm to 3.45pm

Title: Grades and employer learning

Abstract: We identify the signalling value of a grade point average (GPA) on labour market outcomes and how fast employers learn about variation in GPA that is unrelated to labour market productivity. Exploiting a reform-induced variation in university graduates’ GPA, we find that a higher GPA causes higher earnings in the first two years after graduation, after which the signalling effect goes to zero.

We provide suggestive evidence that the signalling effect is more relevant to majors related to larger wage dispersion and the private sector and that the earnings adjustment happens both within and across firms.

We conduct a range of sensitivity tests to validate that the identified relationship represents a signalling effect. Importantly, we show that the recoding scheme that causes variation in the GPA is unrelated to labour market outcomes for non-treated cohorts. Our findings are consistent with a learning model whereby employers initially screen graduates based on observable signals but update their beliefs about worker productivity.

Wednesday 18 November 2020

• Dr Arcangelo Dimico, Queen’s University Belfast
• Time: 2.45pm to 3.45pm

Wednesday 16 December 2020

• Speaker: Professor Guido Cozzi, University of St. Gallen
• Time: 2.45pm to 3.45pm

Title: How much Keynes and how much Schumpeter

Abstract This seminar quantitatively assesses the relative importance of demand and supply-side factors in the recent slowdown of US growth. For this purpose, we estimate a DSGE model with heterogeneous firms and endogenous Schumpeterian growth. We find that Keynesian fluctuations in risk premia and savings behavior drive the recession.

However, our results challenge the view that the slump is a pure demand-side phenomenon. Adverse supply-side factors such as reduced technological spillovers from frontier innovations have also shaped growth dynamics and emerged well before the financial turmoil.

Wednesday 17th February 2021

• Speaker: Yan Cheni, University of Michigan
• Time: 15.00-16.00

Title: Virtual Teams in a Gig Economy

Abstract

Our study examines the effect of virtual teams on worker productivity and retention on an online platform. While the gig economy provides flexible and low-barrier jobs for millions of workers globally, a lack of both organization identity and social bonds contributes to the high attrition rate experienced by gig platforms.

To test the impact of virtual teams, we use a large-scale field experiment with 27,790 drivers on a ride-sharing platform to organize drivers into teams that are randomly assigned to one of three experimental conditions. Treated drivers receive either their team ranking or individual ranking within their team, whereas those in the control condition receive individual performance information without social comparison.

We find that treated drivers generate 2% higher revenue than those in the control condition. We further find that drivers in the team leaderboard treatment continue to work longer hours on the platform three months after the end of the experiment. Lastly, we find that below-median drivers prior to the experiment benefit the most from a team contest.

Wednesday 17th March 2021

• Speaker: Professor Dimitri Tsomocos, University of Oxford
• Time: 14.45-15.45

Title: Optimal Bank Regulation in the Presence of Credit and Run-Risk (joint with Anil K. Kashyap and Alexandros P. Vardoulakis)

Abstract We modify a Diamond and Dybvig (1983) model so that, besides offering liquidity services to depositors, banks also raise equity funding, make loans that are risky, and can invest in safe, liquid assets. The bank and its borrowers are subject to limited liability. When profitable, banks monitor borrowers to ensure that they repay loans. Depositors may choose to run based on conjectures about the resources that are available for people withdrawing early and beliefs about banks’ monitoring. We use a new type of global game to solve for the run decision.

We find that banks opt for a more deposit-intensive capital structure than a social planner would choose. The privately chosen asset portfolio can be more or less lending-intensive, while the scale of intermediation can also be higher or lower depending on planner’s preferences between liquidity provisions and credit extension. To correct these three distortions, a package of three regulations is warranted.

Wednesday 24th March 2021

• Speaker: Professor Yiannis Vailakis, University of Glasgow

• Time: 14.45-15.45

Title: Sovereign Debt Crises and Low Interest Rates (joint with Gaetano Bloise)

Abstract We revisit the occurrence of self-fulfilling crises in sovereign debt markets under time-varying interest rates and growth. We show that, when long-term interest rates exceed growth, insolvency is solely caused by the exhaustion of the sovereign’s debt repayment capacity subject to limited commitment.

Indeed, high interest rates impose discipline on market sentiments, because creditors necessarily become more optimistic about solvency when the sovereign reduces debt exposure. Creditors’ beliefs respond instead ambiguously under low interest rates. As long as interest rates exceed growth, debt reduction alleviates the fiscal burden.

However, the sovereign also benefits from the prospect of rolling over outstanding debt as long as interest rates remain below growth. Thus, creditors’ sentiments might adjust adversely to fiscal consolidation. This mechanism sustains belief-driven debt crises even when fundamentals would otherwise ensure solvency.