Professor Martin Hellwig, director of the Max Planck Institute for Research on Collective Goods in Bonn will give the sixth and final Jelle Zijlstra-lecture.
The lecture, titled: Systemic Risk in the Financial Sector, will take place on Tuesday, 27 May 2008, at 16:00 hours in the Auditorium of the VU University in Amsterdam. Following the lecture, former Minister of Finance Gerrit Zalm will review the lecture.
Professor Hellwig was invited by the Jelle Zijlstra Fellowship Foundation to carry out research at NIAS. His research concerns the economics of information and incentives, the theory of public goods and taxation, and the theory of financial institutions. Professor Hellwig is the Director at the Max Planck Institute for Research on Collective Goods in Bonn and Professor of Economics at the University of Bonn.
The lecture discusses the origins and nature of systemic interdependence in the financial sector. Particular attention will be paid to the different channels of systemic interdependence, contract-based domino effects, interdependence through market prices, and information contagion. This analysis sheds some light on the origins and implications of the current financial crisis. Whereas most commentators have focussed on excessive risks in US subprime mortgages and, more generally, on the moral hazard associated with the originate-and-distribute model of mortgage finance, this lecture ascribes a major role to systemic fallout related to excessive maturity transformation within highly leveraged institutions. The lecture calls for regulators to take this systemic interdependence into account. Moreover, regulatory responses that are limited to individual incentives, institution by institution, are doomed to fail.
The NIAS Jelle Zijlstra Professorial Fellowship Foundation aims to further the study of economics in the Netherlands. To this end a special fellowship, named after the eminent Dutch scholar and statesman Dr. Jelle Zijlstra (1918-2001), was established at the Netherlands Institute for Advanced Study (NIAS) in Wassenaar. The fellowship has received the generous support of the Dutch Minister of Finance, De Nederlandsche Bank, the Dr. Hendrik Muller's Vaderlandsch Fonds, the ABN AMRO Bank, the ING Group, the Fortis Bank (Nederland), AEGON Nederland and the Rabobank Group. This lecture is generously hosted by the VU University, Amsterdam.