WEL-MIT-Central Bank

The WEL-MIT-Central Bank Research Network, started in 2006, aims specifically at developing links with central banks. These links consist primarily of a meeting each year in Cambridge, as well as short visits to the department by central bank researchers. 

The MIT Central Bank Research Network 2007 Fall Conference 

Summary of the WEL-Central Banks Network Meeting, December 13-14, 2007

The main topic of the meeting was “Liquidity”. In keeping with (a young) tradition, the size of the meeting was kept small, with 25 participants, including participants from 14 Central Banks. While the topic had been chosen a year ago, and thus long before recent events in financial markets, it turned out to be extremely timely.

Ricardo Caballero gave the first presentation. He focused on the global picture, and argued that the key to understanding many aspects of the state of the world economy was to realize that the world, as a whole, was short of good tradable assets. With these assets being mostly available in advanced economies, especially the United States, the result was large flows of capital towards the United States, low real interest rates on these tradable assets, and bubbles created by a search for yield by financial investors.

Arvind Krishnamurthy, from Northwestern University, gave the second presentation. He focused more narrowly on liquidity crises. He presented the different approaches economists have developed to think about such crises, as the result of coordination failures, or as the result of capital constraints, or as the result of Knightian uncertainty and minimax behavior. Arvind argued that the last approach was probably the most promising, both in explaining recent episodes as well as the current one.

George Marios Angeletos gave the third presentation, focusing on the role of information in markets, especially financial markets. His analysis shed light on the positive and normative implications of markets where players rely very much both on public and private information, the optimal degree of transparency, and the potential role of policy in this context.

Charles Bean, the Chief Economist of the Bank of England, gave the fourth presentation, called “Liquidity Crunches, Report from the Trenches”. Given his position, Charlie is in a unique position to study the events which have taken place since the summer. He described the evolution of markets, the Northern Rock episode, and the choices confronting the Bank of England along the way.

Andy Lo, from the MIT Sloan School of Management, talked about “What Happened to the Quants in August 2007?”. He showed what happened to hedge funds during three unusually eventful days in August, and, through that episode, gave a revealing example of what can happen in markets with highly leveraged players, all with highly correlated strategies.

Finally, Christian Upper, from Bank for International Settlements, led the discussion of what had been learned and what remained to be learned about liquidity crises.

There was general agreement that the meeting, with its mix of more theoretical and more empirical papers, had been extremely successful. The meeting ended with a short discussion of potential topics of discussion for the next meeting.

 

Fall 07 Conference Programme.pdf

CB Network Mtg participants dec 07.pdf

 

Liquidity What Do We Know.ppt
Christian Upper (Bank for International Settlements) 

The Macroeconomics of Asset Shortages.ppt
Ricardo J. Caballero, MIT

What Happened to the Quants in August 2007.pdf
Amir E. Khandani, MIT; and Andrew Lo, MIT and AlphaSimplex 

Dispersed Information, Monetary Policy, and Central Bank Communication.pdf
George-Marios Angeletos (MIT) 

Efficient Use of Information and Social Value of Information.pdf
George-Marios Angeletos (MIT) and Alessandro Pavan (Northwestern)

Uncertainty and Liquidity Crises.ppt
Arvind Krishnamurthy, Northwestern University 

Collective Risk Management in a Flight to Quality Episode.pdf
Ricardo J. Caballero (MIT) and Arvind Krishnamurthy (Northwestern University) 

Information for Prospective Visiting Central Bank Researchers

MIT does not provide on-campus housing to visitors. The following hotels have brokered rates for MIT visitors and are only a couple of short blocks away from our offices.

The Kendall Hotel: http://www.kendallhotel.com/index2.html

The Residence Inn Boston/Cambridge: http://marriott.com/property/propertypage/BOSCM

The Boston Marriott Cambridge: http://marriott.com/property/propertypage/BOSCB

The Royal Sonesta Hotel: http://www.sonesta.com/boston

The MIT Central Bank Research Network 2006 Fall Conference

Conference Program

Conference Participants

Persistent Appreciations, Overshooting, and Optimal Exchange Rate Interventions, Ricardo Caballero, MIT 

On the Macroeconomics of Asset Shortages, Ricardo Caballero, MIT

The Macroeconomics of Oil, Olivier Blanchard, MIT 

A Theory of Demand Shocks, Guido Lorenzoni, MIT

Monetary Policy, Demand Shocks and the Optimal Use of Dispersed Information, Guido Lorenzoni, MIT

Slides for Demand Shocks, Monetary Policy, and the Optimal Use of Dispersed Information, Guido Lorenzoni, MIT 

Inflation-Forecast Targeting: A Twenty-First Centry Monetary Standard? , Michael Woodford, Columbia University

Opportunities for Collaboration , Lawrence Schembri, Bank of Canada 

Academic Help Wanted: A Policymaker's Prospective, Juan Jimeno, Banco De España , Juan Jimeno, Banco De España 

Academic Help Wanted: A Policymaker's Perspective, by Athanasios Orphanides, Board of Governors of the Federal Reserve System.