To promote research in financial frictions, market performance, and systemic risks, the National Bureau of Economic Research (NBER), with support from the Office of Financial Research at the US Department of the Treasury through an inter-agency agreement with the National Science Foundation, is carrying out a multi-year research initiative. Led by NBER researchers Wenxin Du of Columbia University, Alp Simsek of Yale University, and Chester Spatt of Carnegie Mellon University, this initiative – now in its second year -- is designed to bring together researchers in various subfields of economics and financial economics to study key issues that bear on funding structures, financial intermediaries, capital market frictions, operational and financial linkages across markets, financial stability, and the determinants, detection, and remediation of systemic risk. It will also provide an opportunity for interaction between researchers, policy-makers, practitioners, and regulators, with the goal of identifying and addressing research questions that are particularly important for public policy.
In its first year, this initiative supported six research projects.
Subject to funding approval, the goal for 2024 is to double that number. Priority research topics include, but are not limited to:
* The impact of market innovations on securities trading and the response of market participants and financial institutions to these developments.
* The links between availability of collateral, maturity transformation and liquidity management, and aggregate market conditions.
*The impact of monetary policy and regulatory actions on capital markets, particularly regarding liquidity, short-term funding markets, and systemic risk.
* The role of market microstructure, trading processes, and the identity of market participants on transaction volume, price determination, and market stability.
* Historical as well as prospective and non-traditional sources of systemic risk to financial market infrastructure, including cyber-attacks and other operational risks, and the potential impact of these risk factors on trading behavior and market stability.
* The determinants and consequences of changing levels of market inter-connectedness on aggregate market risk and on the performance of markets during times of stress.
* The impact of clearinghouse mechanisms, settlement processes, and related institutions on the functioning of capital markets, particularly in the presence of rare events that lead to financial distress.
* The role of non-bank financial institutions and global financial institutions in affecting the systemic risk exposure of the US financial system.
* The effect of disintermediation in amplifying or dampening financial instabilities and in propagating financial shocks to the real economy and the implications for macroprudential policy.
* The effects of policy interventions before and during financial crises, such as bail-ins and bail-outs, lender of last resort policies, and stress testing, on the allocation of risks within the financial system.
* The role of trading in derivative products offering high liquidity, but tied to underlying assets with limited liquidity in contributing to financial risks.
* The factors leading to the rise of distributed functions for the storage of data, management of risk, and provision of liquidity, and the impact of the distributed structure on the behavior of market participants and the risks of market volatility.
Researchers interested in studying these topics and other related to the broad themes of the initiative should submit a proposal in PDF format by 11:59pm ET on Tuesday, May 21, 2024. Proposals for both theoretical and empirical projects, from scholars who are early in their careers, with and without NBER affiliations, and from researchers from under-represented groups are especially welcome. Each proposal must contain the following four components:
i) A project proposal of no more than five pages, single spaced, including references, tables, graphs, and other supplementary material, that describes the research question to be studied, the data and methods to be used, and the composition of the research team that will carry out the project. Preliminary findings are welcome.
ii) A conflict of interest statement describing any financial or other interests of the research team that might bear on the proposed work, especially any ties to financial institutions or firms that may be affected by the proposed research.
iii) A one-paragraph summary statement explaining the public policy issue that the proposed research could help to inform.
iv) A curriculum vitae for each investigator.
Please circulate this call for proposals to colleagues and other researchers who are carrying out research that could be suitable for funding.
The organizers will review the proposals and, in consultation with the research staff at OFR, select projects for support. Researchers whose proposals are selected for funding will be notified in June, 2024, or as soon as overall grant support is in place. The research team for each project will receive up to $70,000 of salary support for the principal investigator(s), $15,000 in research assistant support, $7,000 for other research costs such as conference travel, and $5,000 for data purchase. Investigators and research assistants must be eligible to be paid as NBER employees; the NBER will not make sub-awards. In addition to providing research funding, the initiative will also promote knowledge of data sets that are potentially available for researchers in collaboration with researchers at OFR.
To be eligible for funding, a project must have at least one investigator who is a faculty member at a U.S. college or university. Research support is only available for faculty members and graduate students at U.S. institutions. All investigators and co-investigators must hold Ph.Ds. Doctoral students may be supported as research assistants and collaborate on projects, but they may not serve as investigators. All investigators receiving research support will be required to attest to their compliance with the NBER Professional Code of Conduct.
Research teams will be expected to begin their research during the summer of 2024, and to present their findings at a research conference in 2025. All funds must be spent by December 31, 2025. Questions related to research proposals or other aspects of this research initiative should be directed to Anastasia Daukas at daukasa@nber.org.