Finance Seminar（2018-27）

Topic: Market Liquidity and Creditor Runs: Feedback, Amplification, and Multiplicity

Speaker: Xuewen Liu, Hong Kong University of Science and Technology

Time: Wednesday, 14 November, 10:00-11:30

Location: Room K02, Guanghua Building 2

Abstract:

In the global games framework, this paper studies bank runs in a financial system, in which there are many banks and they share a common asset market. Our model 1) endogenizes market liquidity, 2) demonstrates two-way feedback between market liquidity and creditor runs, and 3) shows the possibility of multiple equilibria in the system: even when the precision of creditors’ private signals approaches infinity, multiple equilibria (i.e., a self-fulfilling systemic crisis) can still emerge. Our model helps explain amplification and multiplicity in financial crises.

Introduction:

Xuewen Liu is an Associate Professor of Finance at the Business School of Hong Kong University of Science and Technology. Before joining HKUST in 2010, he was an Assistant Professor of Finance at Imperial College London. He obtained his Ph.D. from the LSE in 2007. Professor Liu has published his research in the prestigious academic journals in finance, economics and accounting, including the Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Management Science, Journal of Monetary Economics, Journal of Economic Theory, Journal of Accounting Research and Journal of Money, Credit and Banking. He is an Associate Editor of International Review of Finance. Professor Liu has a broad range of research interests, particularly in Financial Economics, Macroeconomics, Growth and Development and Chinese Economy.

//www.bm.ust.hk/fina/faculty/directory/xuewenliu

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