Finance Seminar（2015-38）

Topic: Dynamic Coordination and Intervention Policy

Speaker: Lin Cong, University of Chicago

Time: Wednesday, 9 December, 10:00-11:30

Location: Room 109, Guanghua Building 2

Abstract:

This article models a dynamic economy with contemporaneous complementarity and a government - modeled as a large player in global games - that intervenes to mitigate coordination failures. We establish general results on the existence and uniqueness of equilibrium, and show that government intervention affects coordination both contemporaneously and dynamically. Our results suggest that optimal policy always features early intervention. However, excessive intervention in the early period may harm investors as it adversely alters public information structure. Our paper thus has policy relevance to various intervention programs, such as the bailout of money market mutual funds during the financial crisis.

Your participation is warmly welcomed!