Here.

Short-term debt is commonly used to fund illiquid assets. A conventional view asserts that such arrangements are run-prone in part because redemptions must be processed on a first-come, first-served basis. This sequential service protocol, however, appears absent in the wholesale banking sector—and yet, shadow banks appear vulnerable to runs. We explain how banking arrangements that fund fixed-cost operations using short-term debt can be run-prone even in the absence of sequential service. Interventions designed to eliminate run risk may or may not improve depositor welfare. We describe how optimal policies vary under different conditions and compare these to recent policy interventions by the Securities and Exchange Commission and the Federal Reserve. We conclude that the conventional view concerning the societal benefits of liquidity transformation and its recommendations for prudential policy extend far beyond their application to depository institutions.  

From:

David Andolfatto
​Ed Nosal

​

Experimental Finance Conference 2021, Innsbruck, June 16-18
The Department of Banking and Finance at the University of Innsbruck and the Society for Experimental Finance (SEF) invite you to the Experimental Finance Conference 2021, to be held in Innsbruck (Austria) from June 16-18, 2021. The conference also serves as the 11th annual meeting of the SEF.
The prevailing Covid-19 situation in June requires flexibility: The conference will take place in any case – if possible as an in-person event, otherwise as an online event or as a combination thereof. If you cannot attend the conference in person but your paper is accepted, you will have the possibility to give your presentation online. You can find regular updates on organizational details at our conference website: https://www.ef-2021.com. 


Keynote speakers:

• Annamaria Lusardi (George Washington University School of Business)
• Stefan Nagel (University of Chicago Booth School of Business)

Talks with a View (Anniversary Special):

• Roberto Weber (University of Zürich)
• Michael Kirchler (University of Innsbruck)

Submission
We invite you to submit full papers or extended abstracts (with a minimum of 1000 words) using experimental methods covering all areas of finance, broadly defined (please only submit if you have already collected data). Submissions will be peer-reviewed by two anonymous referees. Presentations will be given either in plenary sessions or parallel sessions.
For more information and for submitting your work, please refer to our conference website at: https://www.ef-2021.com


Vernon L. Smith Young Talent Award in Experimental Finance
If you are a junior scientist, we also invite you to apply for the Vernon L. Smith Young Talent Award in Experimental Finance for the best conference paper. This prize is awarded by the SEF and Chapman University and amounts to 8000 USD. See https://www.ef-2021.com/young-talent-award/ for details on the application.


Important Dates
February 28: Submission deadline
March 31: Notification of acceptance


Organizers
Jürgen Huber (University of Innsbruck)
Zwetelina Iliewa (Max Planck Institute, Bonn and SEF Officer)
Christian König-Kersting (University of Innsbruck)
Matthias Stefan (University of Innsbruck and SEF Officer)
​

Here.


We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g., defaults, correlated portfolios and firesales), and perceptions and feedback effects (e.g., bank runs, credit freezes). We also discuss optimal regulation and bailouts, measurements of systemic risk and financial centrality, choices by banks’ regarding their portfolios and partnerships, and the changing nature of financial networks. JEL Classification Codes: D85, F15, F34, F36, F65, G15, G32, G33, G38 Keywords: Financial Networks, Markets, Systemic Risk, Financial Crises, Correlated Portfolios, Networks, Banks, Default Risk, Credit Freeze, Bank Runs, Shadow Banking, Supply Chains, Compression, Financial Bubbles 

From:

Matthew O. Jackson and Agathe Pernoud

Here.

We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g., defaults, correlated portfolios and firesales), and perceptions and feedback effects (e.g., bank runs, credit freezes). We also discuss optimal regulation and bailouts, measurements of systemic risk and financial centrality, choices by banks’ regarding their portfolios and partnerships, and the changing nature of financial networks. JEL Classification Codes: D85, F15, F34, F36, F65, G15, G32, G33, G38 Keywords: Financial Networks, Markets, Systemic Risk, Financial Crises, Correlated Portfolios, Networks, Banks, Default Risk, Credit Freeze, Bank Runs, Shadow Banking, Supply Chains, Compression, Financial Bubbles 


From:

Matthew O. Jackson and Agathe Pernoud
​

Here.

The leadership structure of the American Economics Association is documented using a biographical database covering every officer and losing candidate for AEA offices from 1950 to 2019. The analysis focuses on institutional affiliations by education and employment. The structure is strongly hierarchical. A few institutions dominate the leadership, and their dominance has become markedly stronger over time. Broadly two types of explanations are explored: that institutional dominance is based on academic merit or that it based on self-perpetuating privilege. Network effects that might explain the dynamic of increasing concentration are also investigated.

From:

Kevin D. Hoover and Andrej Svorenčík

Here.

This paper is the first to use the WeChat platform, one of the largest social networks, to conduct an online experiment of artificial investment games. We investigate how people’s forecasts about the financial market and investment decisions are shaped by whether they can observe others’ forecasts and whether they engage in public or private investment decisions. We find that with forecast sharing, subjects’ forecasts converge but in different directions across groups; consequently, forecast sharing does not lead to better forecasts nor more individually rational investment decisions. Whether or not subjects engage in public investment decisions does not significantly affect forecasts or investment. 
​

From:

Xiu Chen
Fuhai Hong
​Xiaojian Zhao

Here.

Recent years have seen an emergence of decentralized cryptocurrencies that were initially devised as a payment system, but are increasingly being recognized as investment instruments. The price trajectories of cryptocurrencies have raised questions among economists and policymakers, especially since such markets can have spillover effects on the real economy. We focus on two key properties of cryptocurrencies that may contribute to their pricing. In a controlled lab setting, we test whether pricing is influenced by costly mining, as well as entry barriers to the mining technology. Our mining design resembles the proof-of-work mechanism employed by the vast majority of permissionless cryptocurrencies, such as Bitcoin. In our second condition, half of the traders have access to the mining technology, while the other half can only participate in the market. This is designed to model high concentration in cryptocurrency mining. In the absence of mining, no bubbles or crashes occur. When costly mining is introduced, assets are traded at prices more than 200% higher than fundamental value and the bubble peaks relatively late in the trading periods. When only half of the traders can mine, prices surge much earlier and reach values of almost 400% higher than the fundamental value at the peak of the market. Overall, the proof-of-work mechanism seems to fuel overpricing, which is further intensified by concentration in mining.

​From:

Marco Lambrecht
Andis Sofianos
Yilong Xu

To be clear, this is a simulation, not a lab experiment, but interesting.

Here.

The transfer paradox, whereby a transfer of resources that influences the equilibrium price benefits the donor while harming the recipient, is a classic paradox in general equilibrium theory. This paper pursues an experimental investigation of the transfer paradox using a theoretical framework of a three-agent pure exchange economy that is predicted to have such a paradox. Two treatments were conducted. In the first treatment, there was one subject for each agent role in the experimental economy. In the other treatment, there were five subjects for each agent role (a total of 15 subjects) in the experimental economy. The experiment results indicate that a transfer of endowments among agents influenced the market clearing price, and consequently the donors benefited from this transfer, consistent with the competitive equilibrium theory. The equilibrium effects were strongest in the treatment with larger group size, resonating with the idea that having a larger number of market participants encourages them to behave competitively. Further, when given an option to make a transfer, the majority of the donor agents endogenously decide to adjust the endowment distribution. A detailed analysis found that the subjects’ decisions to transfer were mainly driven by the equilibrium effects on prices, and their decisions were largely unaffected by their measured level of cognitive ability.


From:

Kenju Kamei

Here

​This article describes the origins and development of the federal funds market from its inception in the 1920s to the early 1950s. We present a newly digitized daily data series on the federal funds rate from April 1928 through June 1954. We compare the behavior of the funds rate with other money market interest rates and the Federal Reserve discount rate. Our federal funds rate series will enhance the ability of researchers to study an eventful period in U.S. financial history and to better understand how monetary policy was transmitted to banking and financial markets. For the 1920s and 1930s, our series is the best available measure of the overnight risk-free interest rate, better than the call money rate which many studies have used for that purpose. For the 1940s-1950s, our series provides new information about the transition away from wartime interest-rate pegs culminating in the 1951 Treasury-Federal Reserve Accord.



From:

Sriya Anbil
Mark Carlson
Christopher Hanes
David C. Wheelock

Here.

​We present the results of a randomized intervention in schools to study how teaching financial literacy affects risk and time preferences of adolescents. Following more than 600 adolescents, aged 16 years on average, over about half a year, we provide causal evidence that teaching financial literacy has significant short-term and longer-term effects on risk and time preferences. Compared to two different control treatments, we find that teaching financial literacy makes subjects more patient, less present-biased, and slightly more risk-averse. Our finding that the intervention changes economic preferences contributes to a better understanding of why financial literacy has been shown to correlate systematically with financial behavior in previous studies. We argue that the link between financial literacy and field behavior works through economic preferences. In our study, the latter are also related in a meaningful way to students’ field behavior.


​From:

Matthias Sutter
Michael Weyland
Anna Untertrifaller
Manuel Froitzheim​

Here.

An economy plagued by a slump and in a liquidity trap has some options to exit the crisis. We discuss “helicopter money” and other equivalent policies that can reflate the economy and boost consumption. In the framework analysed – where lump-sum transfers may be the only effective fiscal response, like in the current pandemic crisis – the central bank, and only the central bank, is the rescuer of last resort of the economy. Fiscal policy is bounded by solvency constraints unless the central bank backs treasury’s debt.


From:

Pierpaolo Benigno
Salvatore Nistico​

Here.

​In October 1979, Federal Reserve Chairman Paul Volcker persuaded his FOMC colleagues to adopt a new policy framework that i) accepted responsibility for controlling inflation and ii) implemented new operating procedures to control the growth of monetary aggregates in an effort to restore price stability. These moves were strongly supported by monetarist-oriented economists, including the leadership and staff of the Federal Reserve Bank of St. Louis. The next three years saw inflation peak and then fall sharply, but also two recessions and considerable volatility in interest rates and money supply growth rates. This article reviews the episode through the lens of speeches and FOMC meeting statements of Volcker and St. Louis Fed president Lawrence Roos, and articles by Roos’ staff. The FOMC adopted monetarist principles to establish the Fed’s anti-inflation credibility but Volcker was willing to accept deviations of money growth from the FOMC’s targets, unlike Roos, who viewed the targets as sacrosanct. The FOMC abandoned monetary aggregates in October 1982, but preserved the Fed’s commitment to price stability. The episode illustrates how Volcker used a change in operating procedures to alter policy fundamentally, and later adapt the procedures to changed circumstances without abandoning the foundational features of the policy. 

From:

Kevin L. Kliesen
David C. Wheelock 
​

Here.

​We study the determinants of new and repeated research collaborations, drawing on the coauthorship network of the International Monetary Fund (IMF)’s Working Papers series. Being an outlet where authors express their views on topics of interest, and given that IMF staff is not subject to the “publish-or-perish” conditions of the academia, the IMF Working Papers series constitutes an appropriate testing ground to examine the endogenous nature of co-authorship formation. We show that the co-authorship network is characterized by many authors with few direct co-authors, yet indirectly connected to each other through short co-authorship chains. We find that a shorter distance in the co-authorship network is key for starting research collaborations. Also, higher research productivity, being employed in the same department, and having citizenship of the same region help to start and repeat collaborations. Furthermore, authors with different co-authorship network sizes are more likely to collaborate, possibly reflecting synergies between senior and junior staff members. 

From:

Dennis Essers
Francesco Grigoli
Evgenia Pugacheva