Essays On Frictions In Financial Macroeconomics
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Essays On Money And Financial Frictions In Finance And Macroeconomics
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Author : Xuan Wang
language : en
Publisher:
Release Date : 2020
Essays On Money And Financial Frictions In Finance And Macroeconomics written by Xuan Wang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
Essays On Frictions In Financial Macroeconomics
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Author : Benjamin S. Kay
language : en
Publisher:
Release Date : 2012
Essays On Frictions In Financial Macroeconomics written by Benjamin S. Kay and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with Consumption (Economics) categories.
Building on Flavin and Nakagawa (2008), chapter one models household optimal consumption and portfolio selection when consumption services are generated by both housing and non-housing consumption. Housing is illiquid in that a non-convex adjustment cost must be paid when it is sold. It is shown that optimal consumption of housing is not a constant fraction of wealth but instead depends on the ratio of wealth to housing and the price of housing. Households adjust housing infrequently, waiting for large wealth changes before adjustment. As in models without this adjustment cost, households adjust non-housing consumption each period. Unlike in frictionless models, non-housing consumption is not a constant fraction of wealth. For particular parameters of the utility function and asset markets drawn from the literature, model simulations match aggregate consumption dynamics better than alternative frictionless models, even those with homes as assets. The simulations also predict differing responses of households with different fractions of their wealth in housing. In chapter two, stock market makers are afraid that informed insiders will take advantage of them in trade. To protect themselves, they may increase the bid-offer spread to include a fee for the adverse selection risk . If set correctly, market makers will share in profits from others trading on private information and can distribute the remaining costs among other market participants. If market makers protect themselves this way, then when the risk of informed trading is relatively low, the bid-offer spread should decline. The risk of informed trading will be relatively low when the difference in public and private information shrinks. Filings with the Securities and Exchange Commission (SEC) and conference calls where corporate earnings are announced and discussed should be events that diminish this difference. Because smaller companies attract less scrutiny, they may experience relatively larger changes in this information distance after these releases. This paper finds weak evidence that spreads diminish when this information is released and a weak size effect. It hypothesizes that the bid-offer spread seems to be unresponsive to information and company size because the adverse selection component of the spread is smaller than has previously been estimated does or possibly does not exist. Estimates of this spread are actually a statistical illusion created by the structural form of earlier estimation techniques. The recent global financial crisis suggests the post-1984 Great Moderation has come to an abrupt end. How we obtained nearly 25 years of stability and why it ended are ongoing puzzles. Chapter three depart from traditional monetary policy explanations and consider two empirical regularities in US employment : i) the decline in the procyclicality of labor productivity with respect to output and labor input and ii) the increase in the volatility of labor input relative to output. We first consider whether these stylized facts are robust to statistical methodology. We find that the widely reported decline in the procyclicality of labor productivity with respect to output is fragile. Using a new international data set on total hours constructed by Ohanina and Raffo (2011) we then consider whether these moments are stylized facts of the global Great Moderation. We document significant international heterogeneity. We then investigate whether the role of labor market frictions in the US as found in Galí and van Rens (2010) can explain the international results. We conclude that their stylized model does not appear to account for the differences with the US experience and suggest a direction for future research.
Three Essays On The Role Of Financial Frictions In Macroeconomics
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Author : Tobias König
language : en
Publisher:
Release Date : 2022*
Three Essays On The Role Of Financial Frictions In Macroeconomics written by Tobias König and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022* with categories.
Essays On Financial Frictions And Macroeconomics
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Author : Sewon Hur
language : en
Publisher:
Release Date : 2012
Essays On Financial Frictions And Macroeconomics written by Sewon Hur and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
Essays On Macroeconomics With Financial Frictions
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Author : Matthew Knowles
language : en
Publisher:
Release Date : 2017
Essays On Macroeconomics With Financial Frictions written by Matthew Knowles and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with Banks and banking categories.
"This dissertation consists of three essays concerning the macroeconomic implications of financial market frictions that limit the ability of firms to obtain external finance. Each of the three chapters employs a theoretical macroeconomic model, combined with some empirical analysis, to study unanswered questions in the literature related to the importance of these financial market frictions for the wider economy. The three chapters consider, in turn, the effect of banking crises on investment, output and employment, the implications of financial market frictions for optimal capital taxation, and the effect of banking deregulation on the distribution of income. The first chapter studies the long slumps in output and employment following banking crises. In a panel of OECD and emerging economies, I find that recessions are associated with larger initial drops in investment and more persistent drops in output if they occur simultaneously with banking crises. Furthermore, the banking crises that are followed by more persistent output slumps are associated with particularly large initial drops in investment. I show that these patterns can arise in a model where a financial shock temporarily increases the costs of external finance for investing entrepreneurs. This leads to a drop in investment and a persistent slump in output. Critical to the model is the distinction between different types of capital with different depreciation rates. Intangible capital and equipment have high depreciation rates, leading these stocks to drop substantially when investment falls after a financial shock. If wages display some rigidity, this induces a slump in output and employment that persists for roughly a decade, through the contribution of the decline in equipment and intangibles to declining production and labor demand. I find that this mechanism can account for almost a third of the persistent drop in output and employment in the US Great Recession (2007-2014). In the model, TFP and government spending shocks lead to relatively smaller declines in investment and less persistent drops in output; so the model is also consistent with the more transitory output drops seen after non-financial recessions, where such shocks may have been more important. The second chapter, based on work co-written with Corina Boar, considers the implications of financial market frictions for optimal linear capital taxation, in a setting where the government is concerned with redistribution. By including financial frictions, we emphasize the effect of a new channel affecting the equity-efficiency trade-off of redistribution: taxes affect the allocative efficiency of capital and, ultimately, total factor productivity. We find that high tax rates can be optimal, provided that they are applied to wealth, rather than risky capital. Under plausible parameter values, we find that the optimal tax on risky capital is lower than that on wealth, and roughly in line with current U.S. levels. This suggests welfare gains from taxing wealth at a higher rate than risky capital. The third chapter, based on work co-written with Corina Boar and Yicheng Wang, studies the effect of banking deregulation in the US on the distribution of income, from both a theoretical and empirical perspective. We focus on the effect of the removal of interstate banking and branching restrictions over the 1970-1994 period. We present a theoretical model based on Greenwood and Jovanovic (1990) to illustrate the channels through which this deregulation may affect the income distribution. In the model, income inequality rises after banking deregulation for some values of the parameters--because deregulation decreases the cost of borrowing, which primarily benefits wealthy firm-owners. We empirically estimate the effect of interstate banking and branching deregulation on income inequality by exploiting variations in the timing of deregulation across states. We find that the removal of banking restrictions increased the Gini coefficient by 6 percent in the long run."--Pages ix-xi.
Three Essays On Macroeconomics And Financial Frictions
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Author : Tiezheng Song
language : en
Publisher:
Release Date : 2019
Three Essays On Macroeconomics And Financial Frictions written by Tiezheng Song and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Essays On The Macroeconomic Implications Of Financial Frictions
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Author : Shuyun Li
language : en
Publisher:
Release Date : 2005
Essays On The Macroeconomic Implications Of Financial Frictions written by Shuyun Li and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.
Essays On Financial Frictions In Macroeconomics
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Author : Johannes Pöschl
language : en
Publisher:
Release Date : 2017
Essays On Financial Frictions In Macroeconomics written by Johannes Pöschl and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Essays In Macroeconomics With Financial Frictions
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Author : Juan M. Hernandez
language : en
Publisher:
Release Date : 2017
Essays In Macroeconomics With Financial Frictions written by Juan M. Hernandez and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
How can governments design policies that alleviate the macroeconomic implications of financial frictions? This dissertation contributes to answer this question focusing on two aspects: international borrowing and crisis prevention at the country's level, and the impact of taxation and financial regulation on entrepreneurship at the agent's level. In the first chapter, debt crises arise from the incompleteness of sovereign debt markets: the government cannot credibly commit to repay or default in certain states of the world and this gives way to non-fundamental debt crises. In a strategic default environment, I show that international reserve holdings help to reduce the probability of these market-driven debt crises, advancing the theoretical literature that had struggled to explain why countries hold reserves while indebted. The results are consistent with previous empirical results that had shown countries with greater reserve holdings faced lower spreads in the sovereign debt markets, which is at odds with the previous theories. In the second chapter, a small open economy faces an aggregate borrowing constraint and the agents fail to internalize how their private borrowing decisions push the total debt towards the limit, making the current account adjustment more severe. We model the decentralized and planner's problem and find the optimal capital control policies, these are very effective to move the economy to the first-best scenario but also very hard to implement, given their state contingent nature. We then address the effectiveness of simpler policy rules, and find that they can bring welfare gains but had to be carefully designed. Finally, in the third chapter, the competition among investors for the most promising entrepreneurs, under adverse selection and limited liability, leads to an excessive entry into entrepreneurship activity and allocates resources to socially inefficient projects. We solve the optimal contracting problem and show that the inefficiency disappears if at least one of the next three is missing: competition in financial intermediation, adverse selection or limited liability. We also show that a small cost or fee per contract, like red-tape requirements, is enough to restore efficiency, making a case for financial regulation.
Essays On Information And Financial Frictions In Macroeconomics
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Author : Abolfazl Rezghi
language : en
Publisher:
Release Date : 2023
Essays On Information And Financial Frictions In Macroeconomics written by Abolfazl Rezghi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
This dissertation examines how information and financial frictions impact firms' investment decisions and shape the effectiveness of monetary policy. The first chapter studies the response of high and low credit quality firms to expansionary monetary shocks. According to the findings, high credit quality firms respond to an expansionary shock by increasing their investment, inventory, and sales, whereas low credit quality firms experience a decrease in these variables. Moreover, their financing behavior differs, with high credit quality firms raising funds through equity while low credit quality firms are unable to issue equity or debt. To provide a theoretical explanation for these findings, a simple model is constructed with two types of firms: financially constrained firms and unconstrained firms. Financially constrained firms face a trade-off in allocating their limited funds between wage payments and investment, while unconstrained firms have greater financial flexibility. As a result of an expansionary shock, an increase in wages affects constrained firms disproportionately, leading them to cut their investment to cover the additional labor costs. Furthermore, constrained firms, due to their limited collateral, have to reduce their debt, which aligns with the empirical observations. The second chapter examines the interaction between information and financial frictions and its implications for the investment channel of monetary policy. In a model with inattentive firms facing financial frictions, constrained firms are more attentive to monetary policy as they attempt to avoid financial costs, creating a new channel for financial frictions to affect price rigidity. Since the level of price rigidity is one of the determinants of the outcome of the monetary policy, the model suggests that the investment channel of monetary policy hinges on the interaction between financial frictions and rational inattention. The research provides empirical evidence that supports the predictions of the model. Firstly, the study uses firms' expectation surveys and, taking size as a proxy for financial constraint, finds that smaller firms have more precise nowcasts and forecasts of aggregate variables. Additionally, these firms are more willing to pay for professional forecasts. Secondly, the research employs firms' balance sheet data and a proxy for aggregate attentiveness to demonstrate that higher information rigidity leads to a sluggish and dampened aggregate investment response to monetary shocks, as predicted by the model. The third chapter finds that a contractionary monetary shock would increase the number of defaults and the aggregate liability of defaulted firms in the economy. Using a DSGE model with financial intermediaries, I show that a higher rate of default negatively impacts the balance sheets of banks and leads to a decrease in the supply of credit and a rise in the interest rate of loans. This further increases the cost of production, forcing more firms to file for bankruptcy. The study demonstrates that monetary policy can effectively dampen this amplification mechanism by considering the default rate in the policy rule, thereby ensuring a more stable economic environment