Information Economics and Macroeconomics Theory

     Roger Meyerson

Noble Laureate and Professor of Economics at the University of Chicago

Wednesday 18 June, 17:00-18:00, Refettorio, Badia

Before the development of information economics in the 1970s, there was no microeconomics of banking on which macroeconomic theory could be based.  Moral-hazard agency theory and the economics of information can provide the basis for a better understanding of macroeconomic instability.  Credit rationing and debt leverage constraints can be derived from moral hazard in entrepreneurship and financial intermediation.  However, uninformed investors’ concerns about adverse selection can make debt financing more attractive to entrepreneurs and financial   ntermediaries, up to these moral-hazard leverage constraints.

Long-term incentive contracts that efficiently solve moral hazard problems with limited liability should be recognized as a factor which by itself can cause the economy to be dynamically unstable.  Such agency problems can offer a basis for debt-deflation or balance-sheet theories of recessions, with fundamental implications for macroeconomic stabilization policy.

Andrea Mattozzi, Professor of Microeconomics at EUI, will introduce the speaker

The Lecture will be chaired by MWF Martin Dumav (ECO)