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Author : Fabian Winkler
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (16 download)
Download or read book Essays on Financial Markets and Business Cycles written by Fabian Winkler and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jan Toporowski
Publisher : Anthem Press
ISBN 13 : 0857286560
Total Pages : 158 pages
Book Rating : 4.8/5 (572 download)
Download or read book Why the World Economy Needs a Financial Crash and Other Critical Essays on Finance and Financial Economics written by Jan Toporowski and published by Anthem Press. This book was released on 2010-12-01 with total page 158 pages. Available in PDF, EPUB and Kindle. Book excerpt: The essays in this volume explain the key structural features of financial inflation that give rise to financial crisis. These features include excessive reliance on finance to maintain economic activity through rising asset prices. Reliance on asset inflation induces a preoccupation with property values and a new social divide between the asset-rich and the asset-poor that undermines the culture of the welfare state. When debt can no longer be supported by cash flow from asset markets, excess debt plunges economies into economic depression.
Author : Yankun Wang
Publisher :
ISBN 13 :
Total Pages : 79 pages
Book Rating : 4.:/5 (826 download)
Download or read book Essays on Financial Frictions and Business Cycles written by Yankun Wang and published by . This book was released on 2011 with total page 79 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation I explore the relationship between the frictions in a country's financial market and its business cycle movements. It is well known that the financial market is far from perfect, and shocks originating in such market could have sizable impact on the real economy. On the other hand, evolvement in the financial market could also be a reflection of the real economy. For example, economic downturn often leads to high borrowing cost for a country in the international financial market. The essays in this dissertation present an analysis of this two-way relationship, both qualitatively and quantitatively. The first essay studies the link between country credit spreads - defined as the difference between a home country's cost of borrowing from the international credit market and the world riskless interest rate - and the domestic business cycle fluctuations. By combining both empirical and theoretical analysis, this essay shows that deteriorating credit markets are both reflections of a declining economy and a major factor that depresses economic activity. This study uses a quarterly dataset over the period 1972Q1 to 2010Q1 for South Korea. The second essay probes the importance of financial shocks in creating business cycles in the United States. It starts from a theoretical dynamic stochastic generating equilibrium model, which identifies positive financial shocks as those that drag down the corporate net worth while raising domestic output. An empirical analysis later uses this property to identify financial shocks and study their importance in creating business cycle movement for the U.S. in the past fifty years. This property is in stark contrast to technological shocks, which raise both corporate net worth and total output.
Author : Fischer Black
Publisher : John Wiley & Sons
ISBN 13 : 0470499176
Total Pages : 224 pages
Book Rating : 4.4/5 (74 download)
Download or read book Business Cycles and Equilibrium written by Fischer Black and published by John Wiley & Sons. This book was released on 2009-11-02 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: An updated look at what Fischer Black's ideas on business cycles and equilibrium mean today Throughout his career, Fischer Black described a view of business fluctuations based on the idea that a well-developed economy will be continually in equilibrium. In the essays that constitute this book, which is one of only two books Black ever wrote, he explores this idea thoroughly and reaches some surprising conclusions. With the newfound popularity of quantitative finance and risk management, the work of Fischer Black has garnered much attention. Business Cycles and Equilibrium-with its theory that economic and financial markets are in a continual equilibrium-is one of his books that still rings true today, given the current economic crisis. This Updated Edition clearly presents Black's classic theory on business cycles and the concept of equilibrium, and contains a new introduction by the person who knows Black best: Perry Mehrling, author of Fischer Black and the Revolutionary Idea of Finance (Wiley). Mehrling goes inside Black's life to uncover what was occurring during the time Black wrote Business Cycles and Equilibrium, while also shedding light on what Black would make of today's financial and economic meltdown and how he would best advise to move forward. The essays within this book reach some interesting conclusions concerning the role of equilibrium in a developed economy Warns about the use and abuse of modeling Explains the risky business of risk in a straightforward and accessible style Contains chapters dedicated to "the effects of uncontrolled banking," "the trouble with econometric models," and "the effects of noise on investing" Includes commentary on Black's life and work at the time Business Cycles and Equilibrium was written as well as insight as to what Black would make of the current financial meltdown Engaging and informative, the Updated Edition of Business Cycles and Equilibrium will give you a better understanding of what is really going on during these uncertain and volatile financial times.
Author : In Hwan Jo
Publisher :
ISBN 13 :
Total Pages : 103 pages
Book Rating : 4.:/5 (919 download)
Download or read book Essays on Business Cycles with Credit Shocks written by In Hwan Jo and published by . This book was released on 2015 with total page 103 pages. Available in PDF, EPUB and Kindle. Book excerpt: A recent but growing literature in macroeconomics works to reconcile microeconomic data with the micro-level predictions of dynamic stochastic equilibrium models in an effort to improve the aggregate performance of macroeconomic models. My dissertation follows in this new tradition. It also contributes to a recently revitalized literature attempting to understand the links between financial markets and real economic activity. The essays discussed below examine how real and financial shocks affect the distribution of production in an economy, and how that distribution in turn influences aggregate quantity variables. The models I explore involve rich, time-varying distributions of firms differing in their capital stocks, debt, and productivities.
Author : Steven M. Fazzari
Publisher : Routledge
ISBN 13 : 1317470575
Total Pages : 209 pages
Book Rating : 4.3/5 (174 download)
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.
Author : Hyman Minsky
Publisher : Routledge
ISBN 13 : 1317232496
Total Pages : 329 pages
Book Rating : 4.3/5 (172 download)
Download or read book Can It Happen Again? written by Hyman Minsky and published by Routledge. This book was released on 2016-04-14 with total page 329 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the winter of 1933, the American financial and economic system collapsed. Since then economists, policy makers and financial analysts throughout the world have been haunted by the question of whether "It" can happen again. In 2008 "It" very nearly happened again as banks and mortgage lenders in the USA and beyond collapsed. The disaster sent economists, bankers and policy makers back to the ideas of Hyman Minsky – whose celebrated 'Financial Instability Hypothesis' is widely regarded as predicting the crash of 2008 – and led Wall Street and beyond as to dub it as the 'Minsky Moment'. In this book Minsky presents some of his most important economic theories. He defines "It", determines whether or not "It" can happen again, and attempts to understand why, at the time of writing in the early 1980s, "It" had not happened again. He deals with microeconomic theory, the evolution of monetary institutions, and Federal Reserve policy. Minsky argues that any economic theory which separates what economists call the 'real' economy from the financial system is bound to fail. Whilst the processes that cause financial instability are an inescapable part of the capitalist economy, Minsky also argues that financial instability need not lead to a great depression. This Routledge Classics edition includes a new foreword by Jan Toporowski.
Author : Keita Oikawa
Publisher :
ISBN 13 : 9781339065748
Total Pages : pages
Book Rating : 4.0/5 (657 download)
Download or read book Essays on International Business Cycles written by Keita Oikawa and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation, I present three essays on international business cycles. In the first essay, I document the empirical regularities of international business cycles using the OECD Quarterly Data, and review the existing literatures in this field. By checking the data, I point out 1) net exports-output ratios both in nominal and real terms are countercyclical before 1990 for most of the OECD countries, 2) but the ratios changes their signs from negative to positive after 1990 for some of the countries, and 3) the main reason for the sign changes is that there are changes in the relationship between exports and output: exports were weakly correlated with output or were lagged with output before 1990, but exports become strongly correlated with output and also coincident. In the literature review part, I suggest that many of the properties of international real business cycles can be accounted for by benchmark international real business cycle models, such as Backus, Kehoe and Kydland (1992) and subsequent literatures, but those models cannot account for the coexistence of procyclical and countercyclical net exports. Further, incorporating Bansal and Yaron (2004)-style multi-factor productivity with short-run (trend-stationary transitory) shocks and long-run (difference-stationary growth) shocks are promising in order to account for the new observation about the trade variables. In the second essay, I document that the correlation between net exports and output has not always been negative after 1960. For the G6 countries, most of the countries experienced countercyclical net exports before 1990. However, some of these countries, including Germany and Japan, experienced procyclical net exports after 1990 even though they experienced countercyclical net exports before that. I also show that a simple one-good two-country business cycle model with a multi-factor productivity process can explain the phenomena. A positive transitory shocks to productivity leads to a positive response in net exports because its consumption risk-sharing effect, which causes a international resource flow from Home to Foreign country, is larger than its efficiency effect, which causes an increase in investments in Home country by importing goods form Foreign country. On the other hand, a positive growth shocks to productivity lead to a negative response in net exports because its consumption risk-sharing effect is smaller than its efficiency effect. I estimate the stochastic productivity processes for the G6 countries by using the simulated method of moments, and the simulation results of the model based on the estimated parameters are able to account for the changes in net export dynamics from pre-1990 to post-1990 for Germany and Japan. In the third essay, I document that there are changes in the correlations about trade variables and capital flows for the G7 countries: 1) the magnitude of the contemporaneous correlation of exports with output is a half of that of imports with output for pre-1990, but the former is almost the same value as the latter for post-1990, 2) the magnitude of the contemporaneous correlation of real net exports-output ratio with output is significantly negative for pre-1990, but it becomes almost zero or weakly positive for post-1990. I present two types of two-country two-good real business cycle models, one of which is with complete financial markets and the other one is with incomplete financial markets model in a sense that only risk-free one-period bonds are traded. I also add two types of shocks, transitory and growth shocks, to these two models in the spirit of Aguiar and Gopinath (2007). Firstly, the standard complete financial markets model has a strong correlation of exports with output and a weak correlation of imports with output. Secondly, the standard incomplete financial markets model has a weak correlation of exports with output and a strong correlation of imports with output. Finally, with reasonable changes in model parameter values, both the complete and incomplete market models can account for the two empirical regularities above, but only the incomplete market model can account for the empirical regularities for pre-1990. I evaluate these models in light of cross-country correlation properties based on actual data, especially the cross-country consumption correlation anomaly. I show that the incomplete financial markets model is still better than the complete market model because the cross-country consumption correlation in the incomplete financial markets model is still larger than but closer to the cross-country output correlation compared with the case of the complete financial markets model.
Author : Andrés Fernández Martin
Publisher :
ISBN 13 :
Total Pages : 386 pages
Book Rating : 4.:/5 (746 download)
Download or read book Essays on Business Cycles in Emerging Economies written by Andrés Fernández Martin and published by . This book was released on 2010 with total page 386 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jacob B.L. Smith
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (964 download)
Download or read book Trends and Cycles in Financial Markets written by Jacob B.L. Smith and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is a collection of three essays applying modern time series techniques in the context of financial markets. There is a particular focus on disentangling persistent trend components from transitory cyclical dynamics. The information contained in these cyclical components is leveraged to garner insight into the broader macroeconomy. The first essay, Trend and Cycle in the Yield Curve: A Procedure for Forecasting Recessions, utilizes short-term (slope) dynamics present in the yield curve to predict impending economic downturns. Building on a large body of literature chronicling the relationship between the shape of the yield curve and the business cycle I employ Dynamic Nelson-Siegel modeling to define the level, slope, and curvature characteristics of the term structure through time. Given these dynamics, the trend and cycle are extracted using various decomposition techniques. I show that cycles present within the slope factor are extremely robust predictors of recessions, correctly identifying recessions as much as eighteen months in advance. Moreover, I develop a ``Predictive Power Score'' as a way to quantify my procedure's performance. This score demonstrates the superiority of my procedure over other common leading indicators including the yield spread. This first essay illustrates a common obstacle faced by researchers when attempting to measure cycles in real-time. Symmetric band-pass filters are estimated at the expense of data trimming, i. e. current estimates of the cycle must be sacrificed in order to construct the filtered series. Building on the work of Baxter and King (1999), Christiano and Fitzgerald (2003) construct a ``one-sided" filter which allows the practitioner to obtain estimates of the cycle in real-time. The second essay of this dissertation, Spurious Periodicity in Christiano-Fitzgerald Filtered Time Series, studies the cyclical properties of time series filtered by the Christiano and Fitzgerald (2003) filter. I show that in the presence of a stochastic trend the CF filter imposes spurious periodicity onto the filtered series, i. e. the filter imparts cyclicality where there is none. This is due to a common defect among band-pass filters which allows cyclical components of the error term to pass through the filter to the estimated cycle. In practice, this leads to cycle estimates of higher amplitude and longer duration. The third essay of this dissertation focuses on an emerging financial market which until recently has received little attention in the academic literature. An Analysis of Bitcoin Exchange Rates studies the relationship between bitcoin prices and the foreign exchange market in a way that has not been done before. I contend that the best way to think of bitcoins is as digital gold. Bitcoins are a purely electronic commodity traded for speculative purposes as well as in exchange for goods and services. Just like physical gold the relative price of bitcoins denominated in different currencies implies a nominal exchange rate. This is a departure from previous literature which treats bitcoin prices themselves as exchange rates. I argue that treating prices as exchange rates is inappropriate as one would not consider the price of physical gold to be an exchange rate. Therefore, I characterize the behavior of nominal exchange rates implied by relative bitcoin prices. I show that the implied nominal exchange rate is highly cointegrated with the nominal exchange rate determined in conventional foreign currency exchange markets. I also show that the direction of causality flows from the conventional markets to the bitcoin market and not vice-versa which can explain much of the volatility in bitcoin prices.
Author : Julian Karl Douglas Wright
Publisher :
ISBN 13 :
Total Pages : 212 pages
Book Rating : 4.F/5 ( download)
Download or read book Essays on Credit Frictions, Debt Choice, and the Business Cycle written by Julian Karl Douglas Wright and published by . This book was released on 1995 with total page 212 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Martin Shubik
Publisher : MIT Press
ISBN 13 : 9780262693110
Total Pages : 472 pages
Book Rating : 4.6/5 (931 download)
Download or read book The Theory of Money and Financial Institutions written by Martin Shubik and published by MIT Press. This book was released on 1999 with total page 472 pages. Available in PDF, EPUB and Kindle. Book excerpt: This first volume in a three-volume exposition of Shubik's vision of "mathematical institutional economics" explores a one-period approach to economic exchange with money, debt, and bankruptcy. This is the first volume in a three-volume exposition of Martin Shubik's vision of "mathematical institutional economics"--a term he coined in 1959 to describe the theoretical underpinnings needed for the construction of an economic dynamics. The goal is to develop a process-oriented theory of money and financial institutions that reconciles micro- and macroeconomics, using as a prime tool the theory of games in strategic and extensive form. The approach involves a search for minimal financial institutions that appear as a logical, technological, and institutional necessity, as part of the "rules of the game." Money and financial institutions are assumed to be the basic elements of the network that transmits the sociopolitical imperatives to the economy. Volume 1 deals with a one-period approach to economic exchange with money, debt, and bankruptcy. Volume 2 explores the new economic features that arise when we consider multi-period finite and infinite horizon economies. Volume 3 will consider the specific role of financial institutions and government, and formulate the economic financial control problem linking micro- and macroeconomics.
Author : Changho Choi
Publisher :
ISBN 13 : 9781124906706
Total Pages : pages
Book Rating : 4.9/5 (67 download)
Download or read book Essays on Technological Change and Financial Markets written by Changho Choi and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation investigates several long-standing issues in macro and international macro, specifically questions related to technological change, financial market imperfections and international risk sharing. The first two chapters analyze these issues in a closed economy model, while the third chapter studies these issues in an open economy model. The first chapter examines the role of credit market imperfections in propagating news of future productivity, both theoretically and empirically. The second chapter investigates the technology-hours debate in an economy buffeted by anticipated technology and fiscal policy shocks. The third chapter, jointly written with Yi Chen, examines the role of a recursive preference developed in Epstein and Zin (1989) in explaining the equity home bias puzzle in an otherwise standard two-country endowment-driven open macro model. Viewed as a whole, my dissertation is an effort to connect technological processes with financial markets in macro models in order to further our understanding of macro phenomena. The first chapter investigates the role of credit market imperfections in shaping the response of the economy to news of future productivity, and proposes an alternative view of how news shocks propagate through the economy. In contrast to the conventional wisdom about news of future productivity - that it generates strong booms in the short run - I develop a novel news-driven business cycle model in which credit market imperfections significantly dampen the short-run response of economic activity to news. To exploit the fact that news of future productivity generates an asymmetry between expected returns and the current financial conditions faced by firms, I model credit market frictions as arising from the agency cost problem. In contrast to the limited enforceability problem, the agency cost problem serves to dampen the short-run response of investment because the desire to increase investment due to the higher expected returns is offset by the endogenous rise in the external finance premium in the absence of an actual rise in productivity. This inertial behavior of investment is in turn transmitted to hours worked and final output through the general equilibrium effect. I then estimate the response of economic activity to news shocks using U.S. manufacturing data and find some suggestive evidence for the credit frictions mechanism presented in the model. The main empirical findings are as follows. First, economic activity exhibits a muted response to news shocks during anticipation periods and therefore tracks, rather than leads, the actual change in productivity. Second, news shocks explain a small fraction of output fluctuations. Finally, industries that are more dependent on external finance or exhibit more volatile idiosyncratic productivity growth appear to have a more dampened response to news shocks in the short run. The second chapter investigates the reliability of using the structural vector autoregression (SVAR) evidence on the response of hours to a technology shock to discriminate between two workhorse business cycle models: standard real business cycle models and sticky price models. Given growing attention to the role of news shocks in the business cycle literature, I evaluate the performance of the SVAR procedure when the true data generating process is driven by news shocks about future technology and fiscal policy. The main results are summarized as follows. First, when the SVAR procedure is applied to the data simulated from an economy with unanticipated shocks to the technology process, the estimated impulse responses have the same sign and qualitative pattern as the true responses. Second, when the SVAR procedure is applied to the data generated from an economy with news shocks to the technology process, the estimated impulse responses generally have a different qualitative pattern from the true responses, and frequently they produce opposite signs. The poor performance of the SVAR procedure largely comes from the anticipation of technology, whereas little is attributed to the anticipation of fiscal policy. Third, if the true data generating process is driven by conventional unanticipated technology shocks, a SVAR researcher can be confident about drawing the conclusion about model discrimination. However, if the true data generating process is driven by news about future technology but a researcher still uses the SVAR procedure based on the conventional information assumption, then the probability that a researcher draws the right conclusion about model discrimination falls dramatically. The third chapter, written jointly with Yi Chen, investigates the role of a recursive preference developed in Epstein and Zin (1989) (EZ) in explaining the equity home bias puzzle, and shows that EZ preferences play a role of increasing the home equity share relative to standard CRRA preferences. This happens because EZ preferences generate a long-run risk hedging demand that contributes to a positive covariance between the relative expenditure and the excess equity return. As a result, the local equity is more likely to be a good asset since it pays off more when investors are willing to spend more. Additional main findings are as follows. First, using the least structural information, we show that the degree of equity home bias depends on the conditional covariance-variance ratio between the relative expenditure and the excess equity return, which nests as a special case the standard CRRA models' implication that the equity home bias depends on the conditional covariance-variance ratio between the real exchange rate and the excess equity return. Second, our model is an infinite-horizon model, while standard trade-cost-based explanations work within two-period models in which portfolio adjustment is impermissible by construction. Thus, our model gets the moment representations for the equity home bias right, while two-period trade-cost-based models assume away portfolio adjustment, thereby overstating the relationship between the real exchange rate and the excess equity return.
Author : Shen Guo
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (11 download)
Download or read book Three Essays on Expectation Driven Business Cycles written by Shen Guo and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis studies business cycles driven by agents' expectation of future technology changes. The first chapter explores the effects which nominal rigidities and monetary policies have on the generation of Pigou cycles. The optimal response of the central bank is analyzed under circumstances when agents receive a signal indicating the technology change in the future. To achieve these objectives, I introduce nominal rigidities and monetary policy into a standard two-sector model with non-durable and durable goods. The optimal reaction of the central bank is found by solving the Ramsey optimization problem. I find that nominal rigidities tend to amplify the responses to the expectation and monetary policies affect the expectation driven business cycles by affecting the real interest rate and user cost of durable goods. Another interesting result is that a simple policy rule reacting to the inflation rates in both non-durable and durable sector with appropriate weights can closely mimic the performance of the Ramsey policy. The second chapter estimates a sticky price two-sector model with home production and capital adjustment costs to assess the significance of the news shocks in generating aggregate fluctuations. The analysis suggests that news shocks account for about 34% of the fluctuations in the aggregate output, 25% of the fluctuations in consumption-sector output and 38% of the fluctuations in investment-sector output. The third chapter explores the booms and busts induced by news shocks in a model economy with financial market frictions. With the presence of financial market frictions, firms have to pay an external finance premium which depends inversely on their net values. This provides firms with an incentive to build up capital stocks now to lower the external finance premium in the future. When firms receive news indicating a future technology improvement, they anticipate the need for more capital and so more external finance in the future; they could lower their future external finance costs by building up their capital and net values now. By adding financial market frictions into an otherwise standard RBC model, the model in chapter 3 succeeds in generating a boom when a news shock hits the economy.
Author : Wan-Jung Hsu
Publisher :
ISBN 13 :
Total Pages : 130 pages
Book Rating : 4.:/5 (1 download)
Download or read book Essays in Financial Economics written by Wan-Jung Hsu and published by . This book was released on 2017 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation aims to investigate the interaction between financial markets and the real economy both in the short-run and the long-run. The first two chapters study the distinct interactions between different states of stock markets and the real economy at monthly frequencies. The third chapter studies the causality between financial development and the economic growth at business cycle frequencies (i.e., three or five-year spells). The first chapter focuses on forecasting the states of the stock market. While previous literature classifies the stock market into binary states (i.e., bull and bear markets), I further classify U.S. stock bear markets into good bear and bad bear markets. The latter are the bear markets associated with contraction phases of future cash flows, while the former are not. Most bad bear markets are accompanied with NBER declared recessions, whereas good bear markets are not accompanied with serious depressions in the real economy. Commonly used macroeconomic predictors also signal differently in forecasting these two types of bear markets. The value premium has distinct magnitude across the two types of bear markets. By applying a multinomial logit model with three alternatives (bull, good bear, and bad bear markets) to predict stock market states, I provide richer information about stock market states which is beneficial for policy makers and investors. In the second chapter, I examine the reliability and timeliness of using stock bad bear markets as early warning signals of economic recessions. I find that bad bear markets are much more reliable to predict recessions than conventional stock bear markets or the forecasting model that targets recessions directly. The forecasting model that predicts bad bear markets also provide timely information about the starts and the ends of economic recessions over NBER announcements. In the third chapter, I revisit the debate of "too much finance" on economic growth. I use different econometric methods in the dynamic panel data framework to address potential biases induced by the dynamic nature of economic growth and financial development but control the heterogeneity across countries. Particularly, I conduct a battery of robustness tests to examine weak instrument problems in the system GMM estimator, developed by Blundell and Bond (1998), and use Half-Panel Jackknife Fixed-Effect estimator, developed by Chudik, Pesaran, and Yang (2016), as an alternative method. I also take care of the outlier issue, which is particularly sensitive when there is nearly multicollinearity among explanatory variables. My empirical results find no sufficient evidence to support a positive causal effect, nor do I find a quadratic effect of financial development on economic growth.
Author : Bongseok Choi
Publisher :
ISBN 13 :
Total Pages : 103 pages
Book Rating : 4.:/5 (818 download)
Download or read book Essays on Industry Investment and Financial Markets written by Bongseok Choi and published by . This book was released on 2011 with total page 103 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation investigates asymmetries of financing patterns, depending on group characteristics - firm size or riskiness, which have shown in the empirical literature. The dissertation consists of two essays. This first essay, Financial innovation, Firm size and Growth, proposes a model of Schumpeterian growth endogeneizing the disproportionate impact of financial innovation on small firm sectors. Entrepreneurial skill on a continuum of types is private information. Hence, the severity of adverse selection problems between investors and entrepreneurs varies based on firm size. In the absence of financial innovation, the arrival of a new technology frontier renders existing screening technology obsolete, thereby making it more challenging for an investor to design a truth-telling mechanism, particularly with small firm (and size-dispersed) sectors. Thus, successful financial innovation is more pronounced in such sectors. The link between financial innovation and the small firm (and size-dispersed) sectors is weak in financially developing countries. I test my model prediction by using cross-country and cross-sector data at the European industry level. This result is consistent with my prediction. The second essay, Firm risks, Capital allocation frictions and the Business cycles, attempts to address new findings in business cycles: the cross-sectional standard deviation of firm level investment rate (investment dispersion) is at most acyclical or procyclical. This differs from the dispersion of productivity, output, and interest rates, which is countercyclical. I develop a dynamic stochastic general equilibrium model of physical capital matching frictions between heterogeneous firms and investors. In the mode, economic fluctuations are caused mainly by shocks to heterogeneity in firms' risks. One main feature is that investors search firms with priority given to loans to safe firms. Because safe firms are most likely to benefit from capital accumulation, this setting drives asymmetric patterns of firm-level business cycles - output, investment rate, and interest rates in a unified framework. In essence, the uncertainty in heterogeneous risks across firms generates the pro- or a-cyclical behavior of investment dispersions which is the data demonstrates.
Author : Jeremy Rastouil
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (114 download)
Download or read book Three Essays on Labor Market Frictions Under Firm Entry and Financial Business Cycles written by Jeremy Rastouil and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: During the Great Recession, the interactions between housing, labor and entry highlight the existence of narrow propagation channels between these markets. The aim of this thesis is to shed a light on labor market interactions with firm entry and financial business cycles, by building on the recent theoretical and empirical of DSGE models. In the first chapter, we have found evidence of the key role of the net entry as an amplifying mechanism for employment dynamics. Introducing search and matching frictions, we have studied from a new perspective the cyclicality of the mark-up compared to previous researches that use Walrasian labor market. We found a less countercyclical markup due to the acyclical aspect of the marginal cost in the DMP framework and a reduced role according to firm's entry in the cyclicality of the markup. In the second chapter, we have linked the borrowing capacity of households to their employment situation on the labor market. With this new microfoundation of the collateral constraint, new matches on the labor market translate into more mortgages, while separation induces an exclusion from financial markets for jobseekers. As a result, the LTV becomes endogenous by responding procyclically to employment fluctuations. We have shown that this device is empirically relevant and solves the anomalies of the standard collateral constraint. In the last chapter, we extend the analysis developed in the previous one by integrating collateral constrained firms in order to have a more complete financial business cycle. The first result is that an entrepreneur collateral constraint integrating capital, real commercial estate and wage bill in advance is empirically relevant compared to the collateral literature associated to the labor market which does not consider these three assets. The second finding is the role of the housing price and credit squeezes in the rise of the unemployment rate during the Great Recession. The last two chapters have important implications for economic policy. A structural deregulation reform in the labor market induces a significant rise in the debt level for households and housing price, combined with a substantial rise of firm debt. Our approach allows us to reveal that a macroprudential policy aiming to tighten the LTV ratio for household borrowers has positive effects in the long run for output and employment, while tightening LTV ratios for entrepreneurs leads to the opposite effect.
