The Design of Financial Systems

Joint Use of Economic Models and Data to

Evaluate the Contemporary Situation and to Formulate Policy

Speakers: Robert M. Townsend,

Elizabeth and James Killian Professor of Economics in the Department of Economics at MIT

Language: English

Time: Monday, October 13, 2014, 2:00—3:30 p.m.

Venue: Zhifuxuan Classroom, Lang Run Garden, Peking University

[Introduction of speaker]

Robert M. Townsend is the Elizabeth and James Killian Professor of Economics in the Department of Economics at MIT, Research Fellow at University of Chicago and the NBER. His contributions in economic theory include the role of financial intermediaries in general equilibrium, the revelation principle, costly state verification, optimal multi-period contracts, decentralization of economies with private information, money with spatially separated agents, financial institutions and economic growth, and forecasting the forecasts of others. His contributions in econometrics include the study of risk and insurance in developing countries, and his work on village India was awarded the Frisch Medal in 1998.

[Abstract]

Financial Systems vary greatly, both across countries and within a given country over time. Theory (economic models) and data (from surveys) can be used in combination to assess a given financial system, both positively, to try to understand how it works, and normatively, to judge its efficiency. Policy prescriptions then come from this algorithm, using theory and data rather than ad-hoc standards. The overall goal is to achieve an ex ante optimal design of financial systems, based on first principles, and not taking markets and institutions as given. Micro economics, macro, finance, development and industrial organization are unified.

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