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Information, Markets, and the Macroeconomy

Objective

Financial markets play an essential role in allocating an economy’s 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.

Field of science

  • /social sciences/economics and business/business and management/commerce

Call for proposal

ERC-2020-STG
See other projects for this call

Funding Scheme

ERC-STG - Starting Grant

Host institution

Centre de Recerca en Economia Internacional (CREI)
Address
Ramon Trias Fargas 25/27
08005 Barcelona
Spain
Activity type
Research Organisations
EU contribution
€ 767 500

Beneficiaries (1)

Centre de Recerca en Economia Internacional (CREI)
Spain
EU contribution
€ 767 500
Address
Ramon Trias Fargas 25/27
08005 Barcelona
Activity type
Research Organisations