Project description
Shrinking information asymmetry in financial transactions
Information is power in financial markets. However, almost all economic transactions involve some degree of information failure, also known as information asymmetry. This is when not all parties involved in an economic transaction possess the same amount of knowledge. While this is not a new concept for economics, little is known about the actual economic conditions that may foster such information asymmetries. The EU-funded INFOMAK project will fill this knowledge gap. It will develop macroeconomic frameworks in which the degree of information asymmetries and the quality of assets are endogenously determined by agents’ decisions to trade in opaque markets or produce complex financial products. In the end, the project will identify the drivers of asset quality and complexity.
Objective
Financial markets play an essential role in allocating an economys resources to their most productive use, fostering investment, employment, innovation, and growth. While there is substantial evidence that financial markets are plagued with information asymmetries and its perils, we do not have a good understanding of what economic conditions may foster such information asymmetries, or how they interact with aggregate investment decisions, liquidity in asset markets, or economic fluctuations.
In order to fill this gap, the goal of this proposal is twofold:
The first component focuses on understanding the drivers of information asymmetries. To do this, first, I will develop novel microeconomic frameworks where the degree of information asymmetries and the quality of assets is endogenously determined by agents decisions to produce complex financial products (project 1) or to trade in opaque markets (project 2). Second, I will construct a novel dataset of financial products attributes to explore the drivers of asset quality and complexity in the data and to test the predictions of my theoretical frameworks.
The second component explores how information asymmetries, through their effect on financial markets, interact with aggregate outcomes, such as market liquidity and investment. To do this, I will develop novel macroeconomic frameworks where I embed my insights on complexity (project 4), and opacity and asset quality (project 5) into dynamic, general equilibrium settings.
Fields of science (EuroSciVoc)
CORDIS classifies projects with EuroSciVoc, a multilingual taxonomy of fields of science, through a semi-automatic process based on NLP techniques. See: The European Science Vocabulary.
CORDIS classifies projects with EuroSciVoc, a multilingual taxonomy of fields of science, through a semi-automatic process based on NLP techniques. See: The European Science Vocabulary.
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Keywords
Project’s keywords as indicated by the project coordinator. Not to be confused with the EuroSciVoc taxonomy (Fields of science)
Project’s keywords as indicated by the project coordinator. Not to be confused with the EuroSciVoc taxonomy (Fields of science)
Programme(s)
Multi-annual funding programmes that define the EU’s priorities for research and innovation.
Multi-annual funding programmes that define the EU’s priorities for research and innovation.
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H2020-EU.1.1. - EXCELLENT SCIENCE - European Research Council (ERC)
MAIN PROGRAMME
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Topic(s)
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Calls for proposals are divided into topics. A topic defines a specific subject or area for which applicants can submit proposals. The description of a topic comprises its specific scope and the expected impact of the funded project.
Funding Scheme
Funding scheme (or “Type of Action”) inside a programme with common features. It specifies: the scope of what is funded; the reimbursement rate; specific evaluation criteria to qualify for funding; and the use of simplified forms of costs like lump sums.
Funding scheme (or “Type of Action”) inside a programme with common features. It specifies: the scope of what is funded; the reimbursement rate; specific evaluation criteria to qualify for funding; and the use of simplified forms of costs like lump sums.
ERC-STG - Starting Grant
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Call for proposal
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Procedure for inviting applicants to submit project proposals, with the aim of receiving EU funding.
(opens in new window) ERC-2020-STG
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08005 Barcelona
Spain
The total costs incurred by this organisation to participate in the project, including direct and indirect costs. This amount is a subset of the overall project budget.