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Three Essays On Monetary Economics

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Three Essays On Monetary Economics

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Author : Mei Dong
language : en
Publisher:
Release Date : 2009

Three Essays On Monetary Economics written by Mei Dong and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with Credit categories.

The thesis consists of three essays on monetary economics. In particular, I focus on using modern monetary theory with explicit microfoundations to address issues in macroeconomics concerning the effects of inflation and the coexistence of multiple assets. The first essay is motivated by the observation that economies undergoing high inflation often experience a reduction of variety in the marketplace. Existing models study how inflation affects quantity, but few have studied how inflation affects variety. In a monetary model with explicit microfoundations, I analyze how inflation affects variety and quantity. I consider bargaining and price posting with directed search. I show that inflation reduces both quantity and variety under both pricing mechanisms. Quantitatively, the model implies that the total welfare cost of 10% inflation ranges from 4.77% to 8.4% under bargaining and is 1.52% under price posting. In the second essay, I study an economy in which money and credit coexist as means of payment and the settlement of credit requires money. The model extends recent developments in microfounded monetary theory to address the choice of payment methods and the effects of inflation. Whether a buyer uses money or credit depends on the fixed cost of credit and the inflation rate. Based on quantitative analysis, the model suggests that the relationship between inflation and credit exhibits an inverse U-shape which is broadly consistent with the evidence. Compared to an economy without credit, allowing credit as a means of payment affects the economy's money demand, welfare and the welfare cost of inflation. In modern monetary theory, money is viewed as a substitute for the record-keeping technology. In the third essay, my coauthor and I investigate whether one money constitutes a perfect substitute for the record-keeping technology in a quasi-linear environment, where private information and limited commitment are present. We adopt the mechanism design approach and solve a planner's problem subject to various constraints. The result is that when money is divisible, concealable and in variable supply, one money may not be sufficient to replace the record-keeping technology. We further show that two monies are a perfect substitute for the record-keeping technology.

Three Essays In Monetary Economics

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Author : Seonghwan Oh
language : en
Publisher:
Release Date : 1988

Three Essays In Monetary Economics written by Seonghwan Oh and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1988 with categories.

Three Essays In Monetary Economics

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Author : Alexander Light Wolman
language : en
Publisher:
Release Date : 1996

Three Essays In Monetary Economics written by Alexander Light Wolman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996 with categories.

Three Essays In Monetary Economics

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Author : Kapil Seth
language : en
Publisher:
Release Date : 1990

Three Essays In Monetary Economics written by Kapil Seth and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1990 with categories.

Three Essays On Monetary Economics

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Author : Shiu-Sheng Chen
language : en
Publisher:
Release Date : 2004

Three Essays On Monetary Economics written by Shiu-Sheng Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.

Three Essays On Monetary Economics

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Author : Ahmed Ragab Elsaid Abdelhamid Hanoma
language : en
Publisher:
Release Date : 2019

Three Essays On Monetary Economics written by Ahmed Ragab Elsaid Abdelhamid Hanoma 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.

Three Essays In Monetary And Financial Economics

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Author : Liang Ma
language : en
Publisher:
Release Date : 2022

Three Essays In Monetary And Financial Economics written by Liang Ma and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with Economics categories.

This dissertation consists of three essays in the field of monetary and financial economics. Specifically, we use high-frequency financial data to study monetary policies with a focus on the information effect, namely, that some of the interest rate movements around central bank announcements are not policy-driven, but are results of the market becoming aware of the central bank's view about future economic prospects. Understanding the role played by the information effect will help us apprehend monetary policy implications in both normal times and extraordinary situations. Chapter 1 evaluates the impact of unconventional monetary policy in the newly developed instrumental variable structural Vector Autoregression (VAR) framework. In the current low interest rate environment, central banks must resort to using unconventional monetary policies, such as forward guidance and quantitative easing, to flight recessions. To empirically evaluate the effectiveness of these unconventional policies, we need to rely on the clean policy shock. A prominent concern is that the often used high-frequency interest rate surprises not only reflect unexpected policy changes, but also contain the information effect. We contribute to the literature by using a heteroskedasticity identification approach, taking advantage of changes in the relative dominance of economic shocks around different macroeconomic announcements. Analysis based on clean policy shocks suggests that the unconventional policies successfully aided the recovery in the U.S. More importantly, we show that the information effect, while it may introduce bias, is rather modest when it comes to estimating the real impact of unconventional monetary policies. Chapter 2 studies the stock return pattern after the U.S. Federal Open Market Committee (FOMC) announcement. This research is motivated by recent literature that documents stock returns drifts, both before and after FOMC announcements, according to policy rate surprises. Indeed, research has shown that the information contained in the central bank announcement is multifaceted: its current monetary policy stances (monetary policy news) and news about future economic prospects (non-monetary policy news). Our contribution is to combine these two strands of literature. To the best of our knowledge, no study has looked at stock market reactions to the non-monetary news stemming from policy announcements. We identify both good and bad news events using a combination of sign restriction with high-frequency financial prices. The novel finding is that following bad FOMC announcements, that is the market interpreted the Fed announcements as revealing negative information about the economy, we observe significant positive stock returns in a 20-day period. We call this the ``post-FOMC drift.'' Further analysis suggests that the drift is likely caused by relatively heightened risks associated with bad announcements, although the drift is consistent with market overreactions as well. Moreover, the post FOMC drift is a market-wide phenomenon and can be exploited in an easy-to-implement trading strategy with a historical record of earning 40\% of the annual equity premium. In Chapter 3, we explore the channels through which the FOMC announcements affect the financial market. While much of the existing literature measures the surprise components with only changes in policy rates (surrounding the announcement), we contribute to the existing literature by taking a broader view through examining unexpected changes in longer-term yields, corporate credit spreads, and inflation expectations (a proxy for growth prospects), using high-frequency financial data. Through a regression analysis, our findings show that these additional surprises provide orthogonal information and sharply increase the goodness of fit in explaining stock returns around FOMC announcements, with the inclusion of inflation expectations having the biggest contribution. The important role of inflation expectation suggests that the current literature, which uses stock prices together with nominal rates to disentangle the information contents of central bank announcements, may be too limited in the scope of information it uses.