Financial Frictions, Liquidity, and the Business Cycle

About

This course examines the basic channels through which financial frictions affect macroeconomic outcomes. Emphasis will be given to the transmission mechanisms that lead to amplification and persistence of shocks, including the role played by liquidity. Using several general equilibrium models we will learn more thoroughly the functioning of financial markets, why they are prone to crises, and the rationale for financial regulation.

Target group

Master students

Course aim

After completing the course, the student should be able to:

Knowledge:

- Understand the basic imperfect information models of moral hazard and asymmetric information and their applications to the understanding of financial intermediation.
- Use these tools to understand how frictions lead to the amplification and persistence of shocks.

Skills

- Manage the topics, methods, tools and theories learned during the course.
- Analyze the role of different financial frictions
- Be proficient in the application of the concepts and methods which can be then used in other courses or in a future job after
graduation.

Competencies:

- Analyze a macroeconomic problem, where the above‐mentioned concepts and methods are central, that is competence in solving such models and explaining in economic terms the results and implications and how they derive from the assumptions of the model.

Fee info