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Economics 589: Financial Economics

First Half, Spring 2012

Instructor
Steve Williamson

• Office: 390 Siegle

• Phone: 935-9283

• email: swilliam@artsci.wustl.edu

• fax: 935-4156

• Office hours: Tuesday, Thursday, 2:30-3:30 pm, by appointment, or drop by

and take your chances.

Grading
Requirements will be:

1. A paper, or part of a paper, 10 pages minumum, on a topic related to something

covered in the course, due May 9.

2. A presentation of one paper, in class, limited to one class session, with no slides
allowed.

Readings
Mostly discussion papers. I’ll upload everything to Blackboard - in the testing
stage, but easy to use.

1. General Equilibrium Models with Debt and other Frictions

Aguiar, M. and Amador, M. 2011. “Fiscal Policy in Debt Constrained Economies,”

working paper, Rochester/Stanford.

Arellano, C., Bai, Y., and Kehoe, P. 2010. “Financial Markets and Fluctuations in
Uncertainty,” working paper, Federal Reserve Bank of Minneapolis.

Shourideh, A. and Zetlin-Jones, A. 2011. “External Financing and the Role of Finan-
cial Frictions Over the Business Cycle,” working paper, Wharton/Minnesota.
 2

Edmond, C. and Weill, P. 2011. “Aggregate Implications of Micro Asset Market

Segmentation,” working paper, UCLA/Melbourne.
Williamson, S. 2011. “Credit Markets, Limited Commitment, and Government
Debt,” working paper.

2. Intermediation and Liquidity

Bansal, R., Coleman, W., and Lundblad, C. 2010. “Endogenous Liquidity Supply,”
working paper, Duke.
Farhi, E. and Tirole, J. 2010. “Bubbly Liqudity,” working paper, MIT.
Lagos, R., Rocheteau, G., and Weill, P. 2011. “Crises and Liquidity in Over-the-
Counter Markets,” working paper, NYU/Irvine/UCLA.
Williamson, S. 2011. “Liquidity, Monetary Policy, and the Financial Crisis: A New
Monetarist Approach,” working paper.

3. Runs
Ennis, H. and Keister, T. 2010. “Banking Panics and Policy Responses,” Journal of
Monetary Economics 57, 404-419.
He, X. and Xiong, W. 2011. “Dynamic Debt Runs,” working paper, Chicago/Princeton.

4. Debt and Collateral

Dang, T., Gorton, G., and Holmstrom, B. 2009. “Ignorance and the Optimality of
Debt for the Provision of Liquidity,” working paper, Yale.
Gorton, G. and Ordonez, G. 2011. “Collateral Crises,” working paper.

5. Adverse Seletion and Moral Hazard in Asset Markets

Guerrieri, V. and Shimer, R. 2011. “Dynamic Adverse Selection: A Theory of
Illiqudity, Fire Sales, and Flight to Quality,” working paper, Chicago.
Chang, B. 2011. “Adverse Selection and Liquidity Distortion in Decentralized Mar-
kets,” working paper, Northwestern.
Li, Y., Rocheteau, G., and Weill, P. 2011. “Liquidity and the Threat of Fraudulent
Assets,” working paper, Taiwan/Irvine/UCLA.
Chari, V., Shourideh, A. and Zetlin-Jones, A. 2010. “Adverse Selection, Reputation,
and Sudden Collapses in Secondary Markets,” working paper, Minnesota.