This course introduces students to the modern micro- and macroeconomic theory of banking
which emphasizes the crucial role of imperfect information in financial markets.
Topics covered in the course include why financial intermediaries exist, the industrial
organization approach to banking, optimal contracting between lenders and borrowers,
the equilibrium of the credit market, macroeconomic consequences of financial
imperfections, individual bank runs and systemic risk, risk management inside the
banking firm, and bank regulation. For each topic complementary empirical evidence
is presented and discussed.