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Departmental seminar: Retirement in the Shadow (Banking)

Dates:
  • Tue 17 Apr 2018 11.00 - 12.15
  Add to Calendar 2018-04-17 11:00 2018-04-17 12:15 Europe/Paris Departmental seminar: Retirement in the Shadow (Banking)

The U.S. economy has recently experienced a large increase in life expectancy and in shadow banking activities. We argue these two phenomena are intimately related. Agents resort on financial intermediaries to buy insurance against an uncertain life span after retirement. When they expect to live longer they are more prone to rely on financial intermediaries that are riskier but offer better terms for insurance -- shadow banks. We calibrate the model to replicate the level of financial intermediation in 1980, introduce the observed change in life expectancy and show that the demographic transition is critical to account for the boom both of shadow banking and credit that preceded the recent U.S. financial crisis. We construct a counterfactual without shadow banks and show that they may have contributed 0.5GDP, which is larger than the estimated cost of the crisis, which ranges around 0.2GDP
Co-author: Guillermo ORDONEZ

Seminar Room,3rd Floor,V. la Fonte DD/MM/YYYY
  Seminar Room,3rd Floor,V. la Fonte

The U.S. economy has recently experienced a large increase in life expectancy and in shadow banking activities. We argue these two phenomena are intimately related. Agents resort on financial intermediaries to buy insurance against an uncertain life span after retirement. When they expect to live longer they are more prone to rely on financial intermediaries that are riskier but offer better terms for insurance -- shadow banks. We calibrate the model to replicate the level of financial intermediation in 1980, introduce the observed change in life expectancy and show that the demographic transition is critical to account for the boom both of shadow banking and credit that preceded the recent U.S. financial crisis. We construct a counterfactual without shadow banks and show that they may have contributed 0.5GDP, which is larger than the estimated cost of the crisis, which ranges around 0.2GDP
Co-author: Guillermo ORDONEZ


Location:
Seminar Room,3rd Floor,V. la Fonte

Affiliation:
Department of Economics

Type:
Seminar

Speaker:
Prof. Facundo Piguillem (EIEF Rome)
 
 

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