sylut387r - Economics 387. Banking and Financial...

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Economics 387. Banking and Financial Intermediation. Spring 2002. Department of Economics, University of Texas Instructor: Dean Corbae, BRB 3.118, (o) 512-475-8530 Syllabus This class will study nancial arrangements in the presence of information and enforcement problems. Generally, one may think that there are veri & - cation and enforcement technologies; the Arrow-Debreu environment where institutions like banks don±t really matter corresponds to the case where ver- i cation and enforcement is costless. The rst quarter of the class will cover short term or static contracting problems in the presence of adverse selection and moral hazard. The second quarter will study the bene ts to long term or dynamic contracting in the presence of private information but full commit- ment. The third quarter will study risk sharing arrangements when agents cannot credibly commit to undertake certain actions (e.g. repay loans) and the possibility of renegotiation. The nal quarter will cover techniques for computing such economies. Generally this involves dynamic programming and the calculation of ergodic distributions de ned over promised future util- ity. Many of the techniques we will cover in the class have applications far beyond banking and nancial institutions: other applications include CEO compensation, unemployment insurance, etc. The requirements for this class are periodic problem sets, computer as- signments, and a nal project. The nal project can be one of two types. First, you can write a 7 page paper which states a well-de ned question that involves an information or enforcement problem, sets up an economic envi- ronment (speci cation of population, preferences, technologies, information structure, and timing of play), and provides some preliminary results and/or conjectures. Second, you can modify the programs that we use in class to actually compute a speci c paper that I assign (this way you can check if you get the same answers as the author(s)). The following texts will be helpful (but are not required). Several copies have been ordered for the book store. (F-R) Freixas, X. and J-C. Rochet. 1997. Microeconomics of Banking . Cambridge: MIT Press. (ISBN 0-262-06193-7) 1
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(F-T) Fudenberg, D. and J. Tirole. 1991. Game Theory .C am b r i d g e
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This note was uploaded on 08/06/2008 for the course ECON 387 taught by Professor Corbae during the Spring '07 term at University of Texas at Austin.

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sylut387r - Economics 387. Banking and Financial...

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