Year In Review
Sparking Financial Policy Conversations
By
The MIT Golub Center for Finance and Policy (GCFP) produces interdisciplinary research and develops educational initiatives that tackle the distinct challenges encountered by governments in their dual roles as financial institutions and regulators of the financial system. In 2023, the GCFP performed thoughtful research and hosted discussions about pressing financial policy issues.
Spotlighting government contingent claims
Last September, the GCFP held its 10th Annual Conference, which focused on the governmental use of contingent claims, or policies whose future value depends on the outcome of an uncertain event. The conference included two panel discussions, “Measuring and Regulating Contingent Risks from Banks” and “Lessons and Challenges for Policymakers,” featuring panelists like Andrew W. Lo (Charles E. and Susan T. Harris Professor; Professor of Finance; Director, Laboratory for Financial Engineering) and Robert S. Pindyck, SB ’66, SM ’67, PhD ’91 (Bank of Tokyo-Mitsubishi Ltd. Professor in Finance and Economics; Professor of Applied Economics). Key takeaways included the need to model customers’ trust in financial institutions and the limitations of the social cost of carbon measures that are often used to estimate the damage from carbon emissions.
I believe that we can do enormously good things in understanding innovation, the dynamics of institutional change, and so many other things.
A highlight of the conference was a fireside chat with Robert C. Merton, PhD ’70, (School of Management Distinguished Professor of Finance) that provided an overview of contingent claims and their role in government decision-making and regulation. Speaking with Deborah J. Lucas (Sloan Distinguished Professor of Finance; Director, GCFP), Merton called for a 21st-century set of institutions that consider risk and uncertainty along with feedback loops when designing regulations and government policies.
Other activities
- Mario Draghi, PhD ’77, the former prime minister of Italy and past president of the European Central Bank, received the Miriam Pozen Prize, which recognizes outstanding researchers or practitioners in financial policy. His Miriam Pozen address discussed the war in Ukraine, the return of inflation, and how these events intersect with international tensions with China.
- Several MIT professors, many affiliated with the GCFP, submitted two comment letters to the U.S. Office of Management and Budget arguing that there is not a single appropriate social discount rate. Rather, the principles of financial economics show that the correct discount rate should reflect the cost of the associated risk, which will vary across projects and policies.
- The panel discussion “SVB Blowup: What Happened and What’s Next” provided much-needed insight into the factors that contributed to the Silicon Valley Bank failure and recommendations for improving bank health.
Finance and Policy
Golub Center for Finance and Policy
GCFP serves as a catalyst for innovative, cross-disciplinary and non-partisan research and educational initiatives that address the unique challenges facing governments as financial institutions.
Learn More
