In this seminar Frank Heinemann will provide an overview of his recent paper, Guarantees, transparency and the interdependency between sovereign and banking risk. The author notices in his paper that government guarantees to the banking sector have traditionally been viewed as costless measures to shore up investor confidence and stave off bank runs. However, as recent experiences of some European countries have demonstrated, the credibility and effectiveness of these guarantees is crucially intertwined with the sovereign’s funding risk. The author find that the coordination problem between banks’ and souvereign’s creditors induces a functional interdependence between the likelihood of a government default and banks’ iliquidity.

Frank Heinemann studied economics in Bielefeld, New York (NYU) and Bonn. He was teaching at the universities of Frankfurt, Mannheim and Munich before he received a chair of macroeconomics at the Berlin University of Technology in 2006. His teaching covers monetary macroeconomics, international economics, and financial crises. He is also interested in experimental economics, where his focus is on macro experiments and coordination games. He has published in Econometrica, Review of Economic Studies, The Economic Journal, Journal of International Economics, Experimental Economics, and others.

The CAMA Macroeconomics Brown Bag Seminars offer CAMA speakers, in particular PhD students, an opportunity to present their work in progress in front of their peers, and reputable visitors to showcase their work.