Some Readings on Liquidity, Leverage and Crisis
In an earlier post I mentioned an interview with Eric Maskin in which he claimed that "most of the pieces for understanding the current financial mess were in place well before the crisis occurred," and identified five contributions that in his view were particularly insightful.
Along similar lines, Yeon-Koo Che has assembled a weekly reading group consisting of faculty and graduate students in the Columbia community to discuss articles that might be helpful in shedding light on recent events. Included among these is a paper by John Geanakoplos that I have surveyed previously on this blog, and several that I hope to discuss in the future. Ten of the contributions we hope to tackle over the coming weeks are the following:
Financial Intermediation, Loanable Funds and the Real Sector by Holmstrom and Tirole
The Limits of Arbitrage by Shleifer and Vishny
Understanding Financial Crises by Allen and Gale
Credit-Worthiness Tests and Interbank Competition by Broeker
Credit Cycles by Kiyotaki and Moore
The Leverage Cycle by Geanakoplos
Collective Moral Hazard, Maturity Mismatch and Systemic Bailouts by Farhi and Tirole
Liquidity and Leverage by Adrian and Shin
Market Liquidity and Funding Liquidity by Brunnermeir and Pedersen
Outside and Inside Liquidity by Bolton, Santos and Scheinkman
I would welcome any comments on these, or suggestions for others that we may have overlooked.