El Departamento de Economía de la Universidad de Chile tiene el agrado de invitar a usted al siguiente seminario académico:

Título: Banking Competition and Economic Stability

Autores: R. Fischer (U. de Chile), N. Inostroza (U. de Chile), F.J.Ramírez (U. of Pennsylvania)

Presenta: Ronald Fischer (U. de Chile)

Abstract: We consider a two-period model of a banking system to explore the eects of competition on the stability and efficiency of economic activity. In the model, competing banks lend to entrepreneurs. After entrepreneurs receive the loans for their projects, there is a probability of a shock. The shock implies that a fraction of rms will default and be unable to pay back their loans. This will require banks to use their capital and reserves to pay back depositors, restricting second period lending, thus amplifying the economic eect of the initial shock. There are two possible types of equilibria, a prudent equilibrium in which banks do not collapse after the shock, and an imprudent equilibrium where banks collapse. We examine the eects of increased competition in this setting. First, we nd existence conditions for prudent equilibria. Second, we show that the eect of increased banking competition is to increase the eciency of the economy at the expense of increased variance in second period economic results. In particular, if the probability of a shock is small, increased competition raises both expected GDP over the two period and expected activity in the second period, after the shock. Increased competition also increases the attractiveness of imprudent equilibria. Unpredicted regulatory forbearance in the aftermath of a shock can be used to reduce or eliminate the variance in economic activity. However, if regulatory forbearance is expected in response to a shock, the eect on the variance after the shock is ambiguous and can even lead to increased variance after a shock. We also show the expected result that as the size of a shock increases, there is less lending in a prudent equilibrium. Finally we show that independently of the type of equilibria or the possibility of a switch among types of equilibria, increased banking competition increases the amplication eect after a shock.

El Seminario se realizará el miércoles 02 de octubre de 13:00 a 14:00 hrs, en la Sala P-301 Tercer Piso del edificio Placa de la Facultad de Economía y Negocios de la Universidad de Chile, ubicada en Diagonal Paraguay 257.

Esperando contar con su asistencia, les saluda cordialmente,

Pamela Fuentes O.