Countries, banks, and other institutions need to borrow money to function. Losing access to external funding can cause the collapse of otherwise healthy institutions and, in the most extreme cases, destabilize the entire financial system. Such funding issues were a key part of the financial crisis in 2008 and at the beginning of the COVID-19 crisis in 2020.
“My goal in the research project FuFri (Funding Frictions after the Global Financial Crisis) is to better understand the risk of losing access to external financing. I will examine signs of tension in the financial system and how institutions respond to them,” says Sven Klingler, Associate Professor at BI Norwegian Business School.
The project starts in 2022 and will continue until 2027. Klingler heads the project, and will collaborate with researchers from Norges Bank, Columbia University, York University, University of Amsterdam and Darden School of Business.
The European Research Council (ERC) has awarded him a so-called Starting Grant. ERC funding is the most prestigious research funding in Europe, and only about 10 percent of the submitted applications in this round succeeded. Only eight other Norwegian applications received funding.
“ERC Starting Grants are aimed at excellent young researchers with 2-7 years of experience since completing their PhD. Winning one is an outstanding achievement and an important step in a very promising research career. This success also clearly demonstrates the impact of our continued efforts to support cutting edge research at BI," says Hilde C. Bjørnland, Provost of Research and Academic Resources.
A rare opportunity
“I am excited that the EU has decided to support my research. This gives me a unique opportunity to study questions that I would not have been able to address otherwise and make a meaningful contribution,” Klingler says.
Asked about the risk for a future financial crisis, he prefers to focus on the present situation and what we can do now.
“I would expect another financial crisis to occur eventually but I do not want to speculate on which form the next crisis will take. Instead, I want to study the tensions that are visible already now and help policy makers respond to future challenges in the best possible way,” he says.
In a press release, the European Research Council notes the importance of supporting young researchers.
“Letting young talent thrive in Europe and go after their most innovative ideas - this is the best investment in our future, not least with the ever-growing competition globally. We must trust the young and their insights into what areas will be important tomorrow,” says Maria Leptin, President of the European Research Council.