Markus Brunnermeier

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Markus Konrad Brunnermeier
Markus Konrad Brunnermeier.jpg
Nationality German
Institution Princeton University
Field Economics
Alma mater London School of Economics
Influences Ben Bernanke
Awards Germán Bernácer Prize and Guggenheim Fellowship
Information at IDEAS / RePEc

Markus K. Brunnermeier (born March 22, 1969) is an economist, who holds the Edwards S. Sanford professorship at Princeton University. He is a faculty member of Princeton’s Department of Economics and director of the Bendheim Center for Finance. His research focuses on international financial markets and the macro economy with special emphasis on bubbles, liquidity, financial crises and monetary policy. He promoted the concepts of liquidity spirals, CoVaR as co-risk measure, the volatility paradox, and the I Theory of Money. He is a member of several advisory groups, including to the IMF, the Federal Reserve Bank of New York, the European Systemic Risk Board, the German Bundesbank and the U.S. Congressional Budget Office.

Education and academic career[edit]

Growing up in Landshut, Germany, Brunnermeier was expected to follow his father into the business of carpentry.[1] A slump in the housing market pressured Brunnermeier into the tax office and the Army. In 1991, he enrolled as an undergraduate student in the University of Regensburg.[2] He continued his studies in Vanderbilt University receiving a Masters degree in Economics in 1994. Subsequently, he joined the European Doctoral Program first at the Bonn Graduate School of Economics and from 1995 to 1999 at the London School of Economics. He was awarded his Ph.D. by the London School of Economics (LSE) in 1999.[3]

While at the London School of Economics, Brunnermeier parlayed a survey paper into a book on asset prices, bubbles, herding and crashes.[2][4] He was subsequently hired by Princeton University as an assistant professor in 1999. He became full professor in 2006 and assumed his current chaired professorship as Edwards S. Sanford Professor of Economics in 2008. In 2011, he set up the Julis Rabinowitz Center for Public Policy and Finance at Princeton’s Woodrow Wilson School. In 2014, he became director of Princeton’s Bendheim Center for Finance.

Brunnermeier received several career awards. He was named a Sloan Fellow in 2005,[5] a Guggenheim Fellow and a Fellow of the Econometric Society in 2010. In 2008 he was awarded the Germán Bernácer Prize, which is granted to a European economists under 40.[6]

Brunnermeier is also affiliated with The National Bureau of Economic Research, Centre for Economic Policy Research in London.[7][8][9] He is a member of several advisory groups, including to the IMF, the Federal Reserve Bank of New York, the European Systemic Risk Board, the German Bundesbank and the U.S. Congressional Budget Office.

Brunnermeier was an associate editor of several journals, including The American Economic Review, The Journal of Finance, The Review of Financial Studies, the Journal of the European Economic Association and the Journal of Financial Intermediation.[10][11][12][13]

Work on macro, monetary and financial economics[edit]

Brunnermeier’s research lies at the intersection of international macro, monetary and financial economics. He primarily studies distortions caused by financial frictions. Financial frictions invalidate the Efficient market hypothesis (EMH),a proposition that markets incorporate all information relevant to prices immediately and consequently the price of a given asset accurately represents the likely value of that asset.[note 1][14] Faced with the empirical evidence that asset prices diverged from their fundamentals during the dot-com bubble, Brunnermeier crafted a model of trading where participants in the market would recognize bubbles in asset prices but continue to trade "into the wind".[15] Brunnermeier's empirical paper, coauthored with Stefan Nagel documents that hedge funds were riding the dot-com bubble, won the Smith Breeden Prize in 2004.[16][17] Brunnermeier and Lasse Pedersen introduced different liquidity concepts and studied liquidity spiral, which are vicious cycles that amplify initial shocks and provide an explanation for liquidity crisis in 2008.[18]

Brunnermeier and Yuliy Sannikov integrated financial frictions into macro and international economic models. Their macro models capture non-linearities that occur during crises episodes. They also introduced the concept of volatility paradox, which refers to the phenomenon that risk builds up primarily during tranquil times in background in the form of imbalances and only materializes when crises erupt. Their monetary paper, The I Theory of Money, studies debt deflation à la Fisher and the interaction between monetary policy and macroprudential policy. It provides an alternative to the predominant New Keynesian view, in which price and wage rigidities are the primary frictions.

Brunnermeier’s work on international finance documents the link between carry trades and currency crashes and analyzes sudden stops in international credit flows and other inefficiencies due to pecuniary externalities. Brunnermeier with Tobias Adrian from the Federal Reserve Bank of New York created one of the first systematic risk measures, the CoVaR, an alternative to value at risk which takes spillover and contagion effects between assets and industries into account.[19]

Notes[edit]

  1. ^ There are multiple forms of the EMH, each with various levels of confidence among academics economists. Among the strong, semi-strong, and weak versions of the hypothesis, the latter have higher levels of support. See Beechey, Gruen & Vickery (2000) for more detail.

References[edit]

  1. ^ "Young Guns: Five Hot Minds in Economics: Markus Brunnermeier". Yale Economic Review (Yale University). 
  2. ^ a b Lahart, Justin (May 16, 2008). "Bernanke's Bubble Laboratory". The Wall Street Journal. Retrieved 2009-08-15. 
  3. ^ Brunnermeier, Markus. "Markus Brunnermeier Profile". Retrieved 2009-08-15. 
  4. ^ Brunnermeier, Markus (2001). Asset Pricing under Asymmetric Information: Bubbles, Crashes, Technical Analysis and Herding. Oxford, UK: Oxford University Press. ISBN 978-0-19-829698-0. 
  5. ^ "Sloan Research Fellowships". The Alfred P. Sloan Foundation. Retrieved 2009-08-16. 
  6. ^ "The Bernácer Prize 2008". Retrieved 2009-08-16. 
  7. ^ "Visiting Scholars". Federal Reserve Bank of New York. Retrieved 2009-08-16. 
  8. ^ "Professor Markus K Brunnermeier". Researcher Contact Details. Centre for Economic Policy Research. Retrieved 2009-08-16. 
  9. ^ "Markus K. Brunnermeier". National Bureau of Economic Research. Retrieved 2009-08-16. 
  10. ^ "Minutes of the Meeting of the Executive Committee" (PDF). American Economic Association. April 24, 2009. Retrieved 2009-08-16. 
  11. ^ "Journal of Finance Editorial Board". The American Finance Association. February 18, 2009. Retrieved 2009-08-16. 
  12. ^ "Journal of the European Economic Association Editorial Board". MIT Press. Retrieved 2009-08-18. 
  13. ^ "Journal of Financial Intermediation Editorial Board". Elsevier. Retrieved 2009-08-18. 
  14. ^ Beechey, Meredith; Gruen, David; Vickery, James (January 2000). "The Efficient Market Hypothesis: A Survey" (PDF). Research Discussion Papers (Reserve Bank of Australia). 2000-01. 
  15. ^ Brunnermeier, Markus; Hong, Harrison; Rose, Charlie (Host); Xiong, Wei (2008). Charlie Rose (Television). Public Broadcasting Service. 
  16. ^ "Brattle and Smith Breeden Prizewinners". The American Finance Association. Retrieved 2009-08-16. 
  17. ^ Brunnermeier, Markus; Nagel, Stephan (2004). "Hedge Funds and the Technology Bubble". Journal of Finance (The American Finance Association) 59 (5): 2013–2040. doi:10.1111/j.1540-6261.2004.00690.x. 
  18. ^ Brunnermeier, Markus; Pedersen, Lasse Heje (2009). "Market Liquidity and Funding Liquidity". The Review of Financial Studies (Oxford University Press) 22 (6): 2201–2238. doi:10.1093/rfs/hhn098. 
  19. ^ "The revolution within". The Economist. May 16, 2009.