Tianxi Wang
Tianxi Wang
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I am an economist at University of Essex, passionate about reaching somewhere far following logic from reliable facts. My research currently explores implications for commercial and central banking of two facts: Bank deposits serve as money; and fiat money provides banks with liquidity; a summary is here.
I am deeply interested in history (recently of English Reformation) and literature, in awe of “In Search of Lost Time” and “红楼梦”, the most profound models of human minds and societies.
email: wangt@essex.ac.uk
Commercial Banking and Financal Econoimcs
Competition and Increasing Returns to Scale: A Model of Bank Size, Economic Journal, 2015
The larger the population using a language, the greater the benefit of learning it. These increasing returns to scale, together with competition, drive the banking sector to be dominated by a few titans.
A Theory of Outside Equity: Financing Multiple Projects, with Spiros Bougheas, Journal of Corporate Finance, 2021
Debt is well known to be the optimal financial contract for funding when managerial moral hazard is a concern. We show that outside equity is as powerful an instrument in restraining moral hazard as debt.
Put your Money Where your Mouth Is: A Model of Certification with Informed Finance, International Review of Finance, 2018
Informed finance is so powerful a sorting instrument that it leads to a complete separation of quality types.
A Model of Leverage Based on Risk Sharing, Economic Letters, 2013
The risk neutral uses the capital of the risk averse to leverage up the rate of return.
Commercial Bank Vulnerability and the Liquidity Constraint Puzzle, with Alan Morrison
Why do banks issue demand deposits, thereby exposing themselves to liquidity crises? The canonical Diamond–Dybvig model assumes that depositors withdraw funds to finance immediate consumption. This ignores a crucial fact: Deposits are a form of money. In this paper, we account for this fact and demandability emerges as a unique equilibrium outcome when banks compete under asymmetric information.
Depositor Anxiety, Liquidity Crises, and Credit Crunches, with Alan Morrison
When anxious depositors scramble for private information about their banks, common knowledge is lost. If unanticipated, this triggers liquidity crises. If anticipated, it causes a credit crunch. Good/Bad bank policy rescues both cases. This is one of my studies on how bank liquidity management affects the credit supply.
How does a bank’s stock of liquid assets affect its credit supply? One might think the more, the better. However, when the liquidity market is beset by the lemons problem, the full picture is way more complicated: The impact of a bank’s liquidity stock on its credit supply is of five phase, non-monotonic and discontinuous, as illustrated below, where the 2nd-best is the credit supply if the lemons problem were absent.
Banks’ promise to pay is money. Banks as issuers of money v banks as financial intermediaries, what is the difference?
Central Banking and Monetary Economics
Bank Liquidity, Interbank-Rate Setting and Heterogeneous Lending Responses, Economic Journal, forthcoming
A new architecture to study banking and money: Real sectors borrow bank deposits for transactions; deposits generate liquidity demand; banks meet this demand with fiat money; and the central bank control fiat money supply. New insights: Money circulation matters for banks' policy response; and policy-rate cuts perversely raise lending rates of maximally liquidity-constrained banks.
Banks’ Wealth, Banks’ Creation of Money, and Central Banking, International Journal of Central Banking, 2019
When banks incur heavy losses during financial crises, they sharply contract lending because of the capital adequacy constraint; a QE of lending fiat money to banks at zero interest rate relaxes this real constraint and expands lending.
Does a severe negative productivity shock drive real sectors to default? Can central banks use nominal subsidies to expand real bank lending to targeted sectors? And to expand overall lending?
Others
The Dynamics of Names: A Model of Reputation, International Economic Review, 2011
The immortal brand-names create value by utilizing personal reputation long after the inevitable oblivion of the mortal.
Increasing Returns to Scale within Limits: A model of ICT and Its Effect on the Income Distribution and Occupation Choice, with Greg Wright, Journal of Economic Theory, 2020
ICT greatly expands workers’ reach in many occupations. This sharply widens within-occupation income inequality. E.g. English footballers' wages, Premier League : Championship : League Two rose from 5 : 2.5 : 1 in 1992 to 25 : 5 : 1 in 2009.
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