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Toward Broader Measures of the Costs and Risks of Development Banks: The Case of the KDB


Time:4:00pm - 5:30pm, June 14, 2019

Venue:Room 359S, Overseas Exchange Center, Peking University

SpeakerDeborah J. Lucas

(Sloan Distinguished Professor of Finance at the MIT Sloan School of Management and Director of the MIT Golub Center for Finance and Policy )





Development banks play a large and in some places growing role in global capital markets. Notably, China, together with more than 60 partner countries, in 2014 launched the new Asian Infrastructure Investment Bank (AIIB) to help fund Asian infrastructure projects, which are projected to total $8 trillion between 2010 and 2020. The AIIB joins the ranks of more than 60 multilateral and single-country development banks (DBs)—state-owned financial institutions that provide financing for a substantial share of infrastructure and other investment projects globally. In this analysis we develop a methodology to evaluate the subsidy costs and risks associated with development banks, and demonstrate its application using the example of the Korea Development Bank (KDB). To evaluate whether or not a DB is creating value, overall or at the level of its individual investments, such subsidy estimates and risk assessments are critical. Nevertheless, the debate about DBs has been carried out largely in the absence of consistent and comprehensive subsidy measurement, including within the DBs themselves.






Dr. Lucas is the Sloan Distinguished Professor of Finance at the MIT Sloan School of Management and Director of the MIT Golub Center for Finance and Policy. Her current research focuses on developing and applying financial economics to evaluate the costs and risks of governments’ financial activities. She is also widely published in the fields of asset pricing and corporate finance. Lucas is a Research Associate at the National Bureau of Economic Research, a term professor at the PBC School of Finance at Tsinghua University and a member of the Shadow Open Market Committee. She serves on advisory boards for the Federal Reserve Bank of New York, the Urban Institute, and the Census Bureau, on the editorial board of the Annual Review of Financial Economics, and as an associate editor and for the American Economic Journal Policy. She is a board member of the Chicago Mercantile Exchange, and consultant for the OECD. She is an elected member of the National Academy of Public Administration and the National Academy of Social Insurance. Previous appointments include chief economist, and subsequently assistant and associate director at the U.S. Congressional Budget Office, member Social Security Technical Advisory Panel, senior staff economist for U.S. Council of Economic Advisers, Professor at the Kellogg School of Management at Northwestern University and co-editor of the JMCB. An expert on federal credit programs, she has testified before the U.S. Congress on Fannie Mae and Freddie Mac, student loans, and strategically important financial institutions. She received her BA, MA, and a PhD in economics from the University of Chicago.