New York University

To model how the capitalization and regulation of financial institutions interact with the macroeconomy

  • Amount $588,205
  • City New York, NY
  • Investigator Robert Engle
  • Initiative Economic Implications of the Great Recession (EIGR)
  • Year 2014
  • Program Research
  • Sub-program Economic Institutions, Behavior, & Performance

Traditionally, macroeconomics and finance have been surprisingly separate subjects.  Yet if the Great Recession taught us anything, it is that macroeconomic models should not ignore the financial sector.  We now know that financial considerations such as risk, regulation, leverage, liquidity, and default can affect the “real economy.”  Funds from this grant support the work of a team led by Robert Engle at New York University to build, test, and refine macro-economic models that incorporate these financial factors.  Engle’s team will pay particular attention to modeling how undercapitalization relative to regulatory requirements affects macroeconomic dynamics.

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