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Essays On Financial Intermediation And Macroeconomic Policy
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Book Synopsis Essays on Financial Intermediation and Macroeconomic Policy by : Arsenii Olegovich Mishin
Download or read book Essays on Financial Intermediation and Macroeconomic Policy written by Arsenii Olegovich Mishin and published by . This book was released on 2020 with total page 366 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies the role of capital requirements in combating excessive risk-taking incentives of banks in two settings.
Book Synopsis Ortsgesetz, über die Erhebung der Hundesteuer und das Halten von Hunden in der Gemeinde Weinböhla by :
Download or read book Ortsgesetz, über die Erhebung der Hundesteuer und das Halten von Hunden in der Gemeinde Weinböhla written by and published by . This book was released on 1907 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on Financial Intermediation and Monetary Policy by : Abolfazl Setayesh Valipour
Download or read book Essays on Financial Intermediation and Monetary Policy written by Abolfazl Setayesh Valipour and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: My research revolves around financial institutions. In this essay, I aim to further our understandings of the internal workings of financial intermediaries, how they interact in financial networks, and how they affect monetary policy and the macroeconomy. In the first chapter, James Peck and I study a bank run model where the depositors can choose how much to deposit. In the many years and many published articles following the bank runs paper of Diamond and Dybvig (1983), only a few papers have modeled the decision of whether to deposit, much less the decision of how much to deposit. The questions we address here are, how does the opportunity for consumers to invest outside the banking system- in investments that do not provide liquidity insurance- (1) affect the nature of the final allocation, (2) affect the nature of the optimal deposit contract, and (3) affect the fragility of the banking system? We extend the Diamond and Dybvig (1983) model so to incorporate sequential service constraint and the opportunity of outside investments and show that under certain conditions the equilibrium entails partial deposits, thus arguing for the optimality of limited banking. One might think that when depositors are allowed to invest a fraction of their endowments outside the banking system, they would be hedging against the risk of a run occurring, but losing out on some of the services provided by banks. Thus, one might think that this would improve the stability of the financial system at the expense of lost efficiency. However, we show that the opposite could be true, with reduced stability (runs more likely) but higher efficiency! In the second chapter, I study the strategic behavior of heterogeneous banks in a network and its implications on the stability of the financial system. I construct a model alas Allen and Gale (2000) wherein banks differ in whether they are hit by an uninsurable excess liquidity demand. I show that in such a framework banks that are already facing a high liquidity demand are more likely to incur the burden of excess liquidity shocks even when that shock has not directly hit them, i.e. relatively healthier banks strategically pass liquidation costs to relatively less healthy banks. I also show that private bailouts arise endogenously in this framework. If the strategic behavior of a bank results in the other bank's failure, the first bank may choose to incur the burden of the liquidity shock by itself to let the other bank survive and, thus, to control the indirect costs of failure feeding back to its portfolio. I also show that for some economies the financial network becomes more stable as the level of cross-deposits is increased from the minimum level that fully insures banks against liquidity demand uncertainty up to a threshold level. In the third chapter, I study the role of financial intermediaries in the transmission of monetary policy in low interest rate environments. The global financial crisis not only proved our understanding of intermediaries were inaccurate and in many ways misleading but also provided an unprecedented opportunity to investigate the questions in ways that were not possible before. Among those, was the behavior of economic players in ultra-low and even negative market rates. I study the internal workings of intermediaries by exploiting geographical variation in market concentration and provide the first explanation for the gradual deterioration of monetary policy power in low market rates that does not rely on bank-specific characteristics and similarly applies to non-bank intermediaries. I show that- in stark contrast to the textbook view but consistent with my mechanism- in low market rates more concentrated banks respond to market rate falls by reducing their deposit supply as well as their loan supply by more than those of less concentrated banks. I argue this behavior is the response of banks to loan and deposit demand becoming less elastic to market rate changes in low market rates which itself is due to the shift of household assets from the ones that are fully responsive to market rate changes (e.g. money market funds) to those less responsive (e.g. deposits) or irresponsive (e.g. cash) in low market rates. As the market rate falls, The downward pressure of the increased market power and the upward pressure of the traditional channels, cause the non-monotonic response of banks to market rate changes. The results help explain the puzzling slow recovery of the economy as well as stable inflation after the global financial crisis. I also show that local house prices become less responsive to market rate changes in low market rates in the counties that are exposed to high-market-power banks.
Book Synopsis Credit, Intermediation, and the Macroeconomy by : Sudipto Bhattacharya
Download or read book Credit, Intermediation, and the Macroeconomy written by Sudipto Bhattacharya and published by . This book was released on 2004 with total page 934 pages. Available in PDF, EPUB and Kindle. Book excerpt: Developments in theories of financial markets and institutions, using the tools of the economics of uncertainty and of contracts, as well as results in game theory, have, over the last two decades, constituted an exciting and burgeoning field of research. This collection of readings drawstogether highlights of the 'second generation' literature in this area, emphasizing the theoretical, institutional, and policy-oriented regulatory implications of some of the key modelling techniques in the field.The collection divides into seven sections covering the monitoring role of banks and other intermediaries; liquidity demand and the role of banks and the government; bank runs and financial crises; bank regulation; inter-bank competition and bank--firm relationships; comparative financial systems;and imperfect credit markets and the macroeconomy. Each section comprises four articles previously published in top-ranking economics and finance journals, plus a discussion by a prominent scholar, who provides a synthesis and critique of the literature, and suggests promising directions for futureresearch and application of results.
Book Synopsis Capital Flows, Financial Intermediation and Macroprudential Policies by : Matteo Ghilardi
Download or read book Capital Flows, Financial Intermediation and Macroprudential Policies written by Matteo Ghilardi and published by International Monetary Fund. This book was released on 2014-08-21 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops an open-economy DSGE model with an optimizing banking sector to assess the role of capital flows, macro-financial linkages, and macroprudential policies in emerging Asia. The key result is that macro-prudential measures can usefully complement monetary policy. Countercyclical macroprudential polices can help reduce macroeconomic volatility and enhance welfare. The results also demonstrate the importance of capital flows and financial stability for business cycle fluctuations as well as the role of supply side financial accelerator effects in the amplification and propagation of shocks.
Book Synopsis Financial Conditions and Macroeconomic Performance by : Steven M. Fazzari
Download or read book Financial Conditions and Macroeconomic Performance written by Steven M. Fazzari and published by Routledge. This book was released on 2015-06-05 with total page 209 pages. Available in PDF, EPUB and Kindle. Book excerpt: This collection of papers on financial instability and its impact on macroeconomic performance honours Hyman P. Minsky and his lifelong work. It is based on a conference at Washington University, St. Louis, in 1990 and includes among the authors Benjamin M. Friedman, Charles P. Kindleberger, Jan Kregel and Steven Fazzari. These papers consider Minsky's definitive analysis that yields such a clear and disturbing sequence of financial events: booms, government intervention to prevent debt contraction and new booms that cause a progressive buildup of new debt, eventually leaving the economy much more fragile financially.
Book Synopsis Essays in Macroeconomics by : Vladimir A. Asriyan
Download or read book Essays in Macroeconomics written by Vladimir A. Asriyan and published by . This book was released on 2014 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: The research presented in this dissertation has been motivated by the Great Recession that has shown us once again how the financial system can amplify and propagate relatively mild economic shocks into larger scale recessions. In the past decade, we witnessed what many may call the worst crisis since the Great Depression that appears to have resulted from a perverse interaction between real estate markets and borrowers' balance sheets. The three chapters of this dissertation are an attempt to shed light on the mechanisms that may have allowed for such perverse effects to arise. I believe that to understand crisis episodes such as the recent one, it is imperative to study why some economic agents become overly exposed to risk, why financial markets fail to function at times, and what policy makers can do to ameliorate the incidence and repercussions of such adverse events. In Chapter 1, "A Theory of Balance Sheet Recessions with Informational and Trading Frictions," I propose a novel theory to rationalize the limited risk-sharing that drives balance sheet recessions as a result of informational and trading frictions in financial markets. I show that borrowers and creditors will find it costly to share macroeconomic risk in environments where creditors value the liquidity of financial claims but where information about the future states of the economy is dispersed and the secondary markets for financial claims feature search frictions. As a result, borrowers will optimally choose to retain disproportionate exposures to macroeconomic risk on their balance sheets, and adverse shocks will be amplified through the balance sheet channel. I show that the magnitude of this amplification becomes closely linked to the level of information dispersion and the severity of search frictions in financial markets. In this setting, I study the implications of the theory for macro-prudential regulation and find that subsidizing contingent write-downs of borrowers' liabilities can be welfare improving. In Chapter 2, "Informed Intermediation over the Cycle," a joint work with Victoria Vanasco, we construct a dynamic model of financial intermediation in which changes in the information held by financial intermediaries generate asymmetric credit cycles as the ones documented by Reinhart and Reinhart (2010). We model financial intermediaries as "expert'' agents who have a unique ability to acquire information about firm fundamentals. While the level of "expertise'' in the economy grows in tandem with information that the "experts'' possess, the gains from intermediation are hindered by informational asymmetries. We find the optimal financial contracts and show that the economy inherits not only the dynamic nature of information flow, but also the interaction of information with the contractual setting. We introduce a cyclical component to information by supposing that the fundamentals about which experts acquire information are stochastic. While persistence of fundamentals is essential for information to be valuable, their randomness acts as an opposing force and diminishes the value of expert learning. Our setting then features economic fluctuations due to waves of "confidence'' in the intermediaries' ability to allocate funds profitably. In Chapter 3, "Credit Crises, Liquidity Traps, and Demand Externalities," I extend the work of Eggertsson and Krugman (2012) to study welfare implications of households' consumption-saving decisions in New Keynesian economies with incomplete asset markets. My contribution is to show that due to aggregate demand externalities the amount of debt pre-contracted in such economies is generally excessive, and that the amount of "over-borrowing" is increasing in the Central Banker's inflation-aversion. This externality arises because an individual household does not internalize its contribution to the overall fragility as the latter is only a function of aggregate indebtedness of all borrowers. These findings suggest that macro-prudential policies geared towards limiting household leverage can indeed be welfare improving.
Book Synopsis Three Essays in Monetary Economics by : Qiao Zhang
Download or read book Three Essays in Monetary Economics written by Qiao Zhang and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation, my research aims at dwelling on the questions, at understanding and explaining -- as a follow of current strand of literature on financial frictions -- the mechanisms that allowed the imperfect and perfect credit intermediation to affect the dynamics of economy and the transmission of monetary policy, and providing a new theoretical formulation for evaluating the unconventional monetary policy. To do this, I first considered the impact of financial intermediation on the analysis of central bank transparency issue (Chapter 2). ln Chapter 3, I focused on the role played by the imperfect financial intermediation/financial frictions in the transmission of shocks : through which mechanisms, do the presence of balance-sheet constraint financial intermediaries affect the effect of shocks on the macroeconomy? Finally, in Chapter 4, 1 construct an theoreticalmodel to analyze an important issue which have net been carried out in existing literature: the transmission mechanism of the central bank's large-scale purchase of mortgage-backed securities. ln this chapter, I first simulated a financial crisis to see if the model is able to replicate some of the most important stylized facts of the Great Recession. Then, basing on the simulated crisis, I examine the efficacy and transmission mechanism of large scale purchases of MBS through comparing these purchases to the purchases of corporate bonds. This experiment is conducted in two credit market configurations, i.e., a partially and a totally segmented credit market. The latter case of market condition is considered by many economists as main obstacle that impedes the nominal functioning of the financial markets. ln this work, we have obtained rich and important findings for guiding the use of unconventional monetary policy. The following parts briefly present the findinqs of the thesis.
Book Synopsis Essays on Financial Intermediation and Unconventional Monetary Policy by : Lisa Monika Cycon
Download or read book Essays on Financial Intermediation and Unconventional Monetary Policy written by Lisa Monika Cycon and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays in Macroeconomics with Financial Frictions by : Juan M. Hernandez
Download or read book Essays in Macroeconomics with Financial Frictions written by Juan M. Hernandez and published by . This book was released on 2017 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Essays on Financial Intermediation in Emerging Europe from Transition to Crisis by : Jasna Atanasijević
Download or read book Essays on Financial Intermediation in Emerging Europe from Transition to Crisis written by Jasna Atanasijević and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main idea in this thesis is to analyze the macroeconomic implication of the micro-level failures of financial markets resulting from economic transformation of countries in Central and Eastern Europe. After first chapter which overviews the overall process of financial sector transition, financial integration and crisis transmission to the region of the Emerging Europe, the following three chapters cover the separate issues based on micro level data empirical analysis. The chapter 2 investigates the liberalized credit market resulting in its segmentation according to risk and transparency of borrowers on the case of Serbia. The empirical research is based on banks field survey and panel data estimation on database consisting of individual banks financial data. The Chapter 3 analyses the role of credit in the newly established monetary policy framework based on generalized method of moments estimation on Serbian banking sector data and points out to weak evidence on the role of credit in monetary policy transmission. The Chapter 4 examines the determinants of financing obstacle using probit estimation on the EBRD database (Business Environment and Enterprise Performance Survey) for 18 European transition economies and demonstrates that firms in productive sectors (manufacturing industry) have had relatively more problem in access to finance. The general conclusion resulting from the thesis is that the regulatory environment and specific policies related to financial sector in new market economies should encompass institutions to deal with information asymmetries and specific market failures that may lead to macroeconomic imbalances and propagation of external shocks.
Book Synopsis Essays on Financial Intermediation and Liquidity by : Ye Li
Download or read book Essays on Financial Intermediation and Liquidity written by Ye Li and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The complementarity between money and credit arises from financial frictions and amplifies economic fluctuations. In the third essay, my coauthors and I model the liquidity demand of banks. To buffer liquidity shocks, banks hold central bank reserves and can borrow reserves from each other. The propagation of liquidity shocks, depend on the topology of interbank credit network, but more importantly, on the type of equilibrium on the network (strategic complementarity vs. substitution). The model is estimated using data on reserves, interbank credit, bank balance sheets, and macroeconomic variables. We propose a method to identify banks that contribute the most to systemic risk, and offer policy guidance by comparing the decentralized outcome with the choice of a benevolent planner.
Book Synopsis Current Issues in Financial and Monetary Economics by : Kevin Dowd
Download or read book Current Issues in Financial and Monetary Economics written by Kevin Dowd and published by . This book was released on 1992 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: In common with other volumes in the series, this book contains essays that review recent developments in an important field of economics, in this case financial and monetary economics. The issues covered include financial intermediation and the operation of financial markets.
Book Synopsis International Financial Intermediation by : Edmar Lisboa Bacha
Download or read book International Financial Intermediation written by Edmar Lisboa Bacha and published by . This book was released on 1982 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on Financial Intermediation and Development by : Gabriel De Abreu Madeira
Download or read book Essays on Financial Intermediation and Development written by Gabriel De Abreu Madeira and published by . This book was released on 2007 with total page 270 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis applies contract theory to topics of financial intermediation. Chapter 1 studies the effects of imperfect legal enforcement on optimal project financing contracts. It departs from an environment that combines asymmetric information about cash flows and limited commitment by borrowers. Incentive for repayment comes from the possibility of liquidation of projects by a court, but courts are costly and may fail to liquidate. These ingredients make it possible to evaluate how interest rates and amounts of credit respond jointly to variations in the reliability of courts. Examples reveal that costly use of courts may be optimal, but both asymmetric information and uncertainty about courts are necessary conditions for legal punishments ever to be applied. Numerical solutions for several parameterizations show wealthier individuals borrowing with lower interest rates and running higher scale enterprises, which is consistent with stylized facts. High reliability of courts has a consistently positive effect on investment. However its effect on interest rates is subtler and depends essentially on the degree of curvature of the production function.
Book Synopsis Essays on Macroeconomic Crises by : Nelson R. Lind
Download or read book Essays on Macroeconomic Crises written by Nelson R. Lind and published by . This book was released on 2017 with total page 183 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines economies that may occasionally enter periods of crisis. I first develop a model of asset pricing in the presence of frictions to financial intermediation. This model generates recurrent financial crises due to its strong non-linear dynamics. Next, I develop methodological tools for analyzing these types of highly non-linear dynamic equilibrium models. I then apply these tools to a theory of housing boom-bust cycles driven by endogenous shifts in lending standards. Chapter 1 introduces a model of asset pricing in the presence of agency frictions between savers and financial intermediaries. This model can generate asymmetric price movements where asset values suddenly collapse during a financial crisis. During normal times, intermediaries arbitrage away excess returns on assets and traditional asset pricing conditions hold. During a financial crisis, the net worth of intermediaries limits their ability to borrow from savers and they are unable to arbitrage away excess returns. Since their net worth depends on realized asset values, collapsing prices further tighten borrowing constraints leading to a large and sudden collapse in asset values. In chapter 2, I introduce a local approach to solving highly non-linear models, generalizing perturbation to handle the class of piecewise smooth rational expectations models. First, I formalize the notion of an endogenous regime by introducing a regime-switching equilibrium (RSE) concept. This framework uses non-linear model features to explain macroeconomic regime changes, and makes the distribution of the regime an equilibrium object instead of imposing an external regime-switching structure. Then, I demonstrate how to apply perturbation within a slackened model, approximate the policy functions associated with a given belief about the regime, and solve for the equilibrium regime distribution using backwards induction. This approach (1) accounts for expectational effects due to the probability of regime change; (2) provides a framework for modeling regime-switching from first principles; and (3) connects macroeconomic theory to reduced-form regime-switching econometric models. Chapter 3 develops a theory of housing boom-bust cycles driven by endogenous shifts in lending standards. The key friction is asymmetric information about default risk, implying that the economy occasionally and endogenously switches between two credit regimes. These regimes differ by whether or not lenders use income verification to screen the marginal homebuyer. A switch from the "screening" regime to the "pooling" regime leads to rapid home price appreciation, a collapse in down-payment requirements, and a reduction in income documentation--consistent with the shift in lending standards during the US housing boom. The episode ends in a foreclosure crisis once fundamentals revert and the screening regime returns. The theory predicts patterns for debt accumulation and mortgage spreads consistent with existing micro evidence.
Book Synopsis Three Essays on Financial Intermediation and Growth by : Ranajoy Ray Chaudhuri
Download or read book Three Essays on Financial Intermediation and Growth written by Ranajoy Ray Chaudhuri and published by . This book was released on 2012 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: My dissertation explores the impact of financial development, as well as regulatory changes in the financial sector, on economic growth. Recent literature on growth has often focused on the importance of financial intermediation and institutional quality. Advocates of financial development say that the development of the banking sector and stock markets increase the financing available to firms, raising productivity. The "institutions hypothesis" proponents suggest that institutions jointly determine the growth rate and the policy choice, while policies themselves bear no causal connection to growth. Such hypothesis is difficult to test empirically because the change in institutional quality is, with a few historic exceptions, very slow. For the most part, therefore, a country's economic performance can end up being attributed to a random cause. Using a cross-country data set and numerous financial indicators, institutional quality variables and growth measures, I find that this is not true of financial development. Financial variables have a significant effect on growth that is distinct from that of institutions like private property and rule of law. I also consider this issue in the context of the fifty U.S. states. States differ with respect to financial indicators like the number of banks, assets, equity, loans and deposits. They also vary in terms of their regulatory environments. States like Delaware, Texas and Nevada have very high scores for economic freedom; Mississippi, New Mexico and West Virginia have very low ones. The results again underscore the importance of financial deepening in order to achieve economic growth. Taking up from this point, the final essay studies the impact of U.S. banking deregulation on growth. Many states relaxed restrictions on intra-state bank branching beginning in the early 1960s, both by allowing bank holding companies to convert subsidiaries into branches and by permitting statewide de novo branching. This increased competition in the banking sector forced banks to become more efficient. The existing literature suggests that one of the channels through which this worked was bank lending. Different industries have varying degrees of dependence on external financing, and industries that have greater dependence should grow faster in the post-deregulation period. Using a panel data set, I find this not to be the case for the U.S.; industries that borrow less from banks actually grew at a faster rate after deregulation. This could reflect commercial banks losing market share to other sources of external financing, the general decline in the U.S. manufacturing sector and the terms of trade moving in favor of agriculture. I also consider the effect of deregulation on various banking indicators and find the strongest impact to be on the number of commercial banks operating in the state. Contrary to existing research, these regulatory changes slowed down growth in the number of bank branches and offices, as well as other measures of bank performance like assets, equity, loans and deposits. This suggests that the gains from deregulation are short-lived, and also indicate unprofitable smaller banks shuttering their operations and the emergence of credit unions and other alternatives to commercial banks.
