Great Recession | EPFL Graph Search

The Great Recession was a period of marked general decline observed in national economies globally, i.e. a recession, that occurred from late 2007 to 2009. The scale and timing of the recession varied from country to country (see map). At the time, the International Monetary Fund (IMF) concluded that it was the most severe economic and financial meltdown since the Great Depression. One result was a serious disruption of normal international relations. The causes of the Great Recession include a combination of vulnerabilities that developed in the financial system, along with a series of triggering events that began with the bursting of the United States housing bubble in 2005–2012. When housing prices fell and homeowners began to abandon their mortgages, the value of mortgage-backed securities held by investment banks declined in 2007–2008, causing several to collapse or be bailed out in September 2008. This 2007–2008 phase was called the subprime mortgage crisis. The combination of

Monetary Independence And Rollover Crises

Jorge Mondragon Minero

This article shows that the inability to use monetary policy for macroeconomic stabilization leaves a government more vulnerable to a rollover crisis. We study a sovereign default model with self-fulfilling rollover crises, foreign currency debt, and nominal rigidities. When the government lacks monetary independence, lenders anticipate that the government would face a severe recession in the event of a liquidity crisis and are therefore more prone to run on government bonds. In a quantitative application to the Eurozone debt crisis, we find that the lack of monetary autonomy played a central role in making Spain vulnerable to a rollover crisis. Finally, we argue that a lender of last resort can go a long way toward reducing the costs of giving up monetary independence.

OXFORD UNIV PRESS INC2022

Financial Stability and the Macroeconomy

Corinne Dubois

The financial crisis of 2007-2009 drew attention to the essential role of banks for the macroeconomy and to the importance of having a resilient financial sector. A vulnerability in the financial sector spills over to the real economy and can drive it into a deep recession. Following the financial crisis, policy makers have issued rules and regulations aimed at strengthening the banks. My dissertation considers some of those measures, namely bank liquidity regulation and deposit insurance, and tries to assess their effectiveness in stabilizing the financial sector and the economy in general. The first chapter (joint with Prof. Luisa Lambertini) develops a model with regulated banks and a hedge fund to analyze the behavior of wholesale funding and the macroeconomic consequences of liquidity regulation. Banks raise deposits and subordinated wholesale funding from the hedge fund. Wholesale funding amplifies shocks: it is curtailed in economic downturns to avoid leveraging up and risk-taking by banks, further depressing credit and economic activity. By making banks safer, liquidity regulation increases wholesale funding and bank loans at the steady state. However, flat liquidity regulation requiring banks to hold a constant fraction of liquid assets can have unintended consequences and increase macroeconomic volatility. Our model further shows that cyclically adjusted regulation stabilizes the response of the economy to shocks. We also provide empirical evidence suggesting that liquidity helps contain the contraction in wholesale funding and loans during times of funding stress. The second chapter explores the macroeconomic and welfare implications of harmonizing or joining deposit insurance in the Eurozone. I develop a two-country model to represent the core and periphery countries in the Eurozone. The model features fragile banks that can be subject to endogenous and costly runs. The two countries are financially integrated through an international interbank market. I introduce deposit insurance and compare different insurance regimes in steady state and along the business cycle. The model emphasizes that financial integration implies co-movement in asset prices and the transmission of shocks across the border. I find that when deposit insurance has lower coverage in the periphery than in the core, financial stability is undermined in both regions due to higher asset price volatility and a higher probability of deposit runs. Hence, either harmonizing or joining deposit insurance leads to substantial welfare benefits for both countries. In the third chapter, I develop a macroeconomic model with multiple equilibria and bank runs to analyze deposit insurance. A bank run is a sunspot equilibrium, and it is caused by a self-fulfilling panic of all depositors. The model features a unique no-run equilibrium when macroeconomic conditions are good, but an unexpected negative shock may open up the possibility of a run equilibrium. A bank run is a rare but costly event that drives the economy in a long and severe recession. I analyze the introduction and build-up of a deposit insurance fund and show that it reduces the cost and probability of bank runs. The dynamic simulation of the model reveals that deposit insurance diminishes macroeconomic and financial instability following a technological shock.

EPFL2018

Ensuring Asset Optimization through Ontology-based Modelling of Technical Documentation

Andreas Koukias

The physical or engineering assets within modern industries have consistently been considered as the core elements of significant value that constitute the backbone for success and overall growth. Ensuring the optimal performance of an asset is a crucial and challenging task, since any breakdown or downtime may have a large impact on product quality, cost of production, operation effectiveness, or even cause health, safety and environmental issues. The performance of any asset within an industrial environment is greatly dependent on the overall usage and maintenance instructions provided by the asset manufacturer to the user. These instructions have always been in the form of a technical documents compilation that accompanies the physical asset. These documents describe the product in a complete manner and often constitute the first line of support when asset operators or maintenance engineers need help with a problem or when they seek to advance their use of an asset. The documentation inherently dictates how the asset should be overall managed in order to achieve the optimal performance. The motivation for this work lies in the fact that traditional technical documentations mainly consist of textual and graphical documents with information that is not being properly put to effective use. Although there has been great progress in newer electronic versions, essentially it is still an arduous and time-consuming process for the users to identify specific answers to their problems or questions. It often requires considerable effort to locate much needed information, especially in case of unexpected emergencies. The documentation is often inaccessible, outdated, has a poor structure and language, and may assume knowledge that the readers don't essentially possess. Therefore, the information included in the documentation is not always being properly and fully consumed by the asset users. Overall, there is a gap between the original documentation instructions and the actual usage that may prevent the assetsâ overall effectiveness from reaching its full potential and may have great repercussions such as damage to the assets, the environment, or even injury to the personnel[6]. This dissertation proposes an ontology-based approach to represent the technical documentation content concerning the assetâs overall usage and maintenance. Ontologies possess high expressive power and degree of formality and most importantly they can describe the content in a machine understandable manner. The approach proposes using ontologies towards efficiently processing and consuming the documentation content in order to confirm that the asset is operated and maintained according to the manufacturerâs instructions. The Technical Documentation Ontology model is developed to represent all the important information contained in the documentation concerning how the asset should be managed. The approach subsequently proposes the implementation of a rule-based mechanism to check the real asset information that is collected during the actual asset usage against the documentation instructions. By comparing the real asset data and the respective instructions, it is possible to identify abnormal behaviors or deviations and recommend appropriate usage and maintenance actions towards ensuring or even optimizing the asset performance. Finally, the approach is validated and evaluated within a case study implemented on a packaging machine from a major Swiss company.