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Seminario CEDE - Paula Beltran

  • SeminarioCEDE-2022-01-28-Paula-Beltran.jpg
Universidad de los Andes
Fecha: 28 de Enero de 2022
Hora: De 11:00 am hasta 12:20 pm

In this paper, I study the transmission of an aggregate funding supply shock in a lending network and quantitatively assess the implications for the allocative efficiency of funding pro-vision of the US Money Markets Funds Industry.  I build a tractable model that features bank sand funds that bargain over the terms of trade subject to an incomplete network of existing counter parties and bilateral bargaining.  I discipline the model using data on the funds’ port-folio.  I show how to identify the key parameters of the model by exploiting granular shocks of connected agents.  Taking as primitives the observed changes in assets under the management of prime funds at the onset of the COVID-19 crisis, the model accounts for 85% of the drop in total lending and 70% of the increase in price dispersion. I show that the allocation is inefficient. Faced with the same drop in asset under management and taking as given the network of bilateral counterparties, a central planner would reduce lending by 9% instead of 14% in equilibrium. Finally, I use the model to examine the effectiveness of the Overnight Repo Repurchase Facility.

Lugar: Zoom