Download or read book Essays in Financial Regulation and Macro finance written by Juliane Begenau and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three separate contributions to the field of macroeconomics and finance. In the first chapter, I present a quantitative dynamic general equilibrium model for the purpose of determining the optimal capital requirement for banks. Banks play two roles in this model: They contribute to the production of a final good and they provide liquidity in the form of bank debt, which households value. Banks also benefit from an implicit bailout guarantee from the government, which motivates them to take on excessive risk. I quantify this model using data from NIPA and the FDIC. Higher capital requirements lower risk-taking and increase consumption, but they also reduce the supply of bank debt. The reduction in bank debt leads to a lower interest rate on bank debt through a general equilibrium effect. This reduces the overall funding costs of banks and allows them to grow larger, which increases the capital stock and, consequently, production as well as consumption. The optimal capital requirement weighs the reduction in economic volatility and the increase in consumption against the reduction in liquidity. Welfare is maximized at 14%. The second chapter is coauthored with Juliana Salomao. Therein, we study how firms finance themselves over the business cycle. Using Compustat data, we first document that large firms substitute between debt and equity financing over the business cycle whereas small firms increase the amount of funds raised, using both debt and equity financing, in good times and reduce it in bad. We propose a mechanism that explains this empirical feature in a heterogeneous firm optimization model. Our mechanism is based on two main features. First, small firms are growing and therefore have higher funding needs compared to large firms. Second, the cost of debt financing depends endogenously on the default probability of the rm as well as on the recuperation value of the bond. This model can account for the cyclical relationships we see in the data. The third chapter is co-written with Monika Piazzesi and Martin Schneider. It studies US banks' exposure to interest rate and default risk. We exploit the factor structure in interest rates to represent many bank positions as portfolios in a small number of bonds. This approach makes exposures comparable across banks and across the business segments of an individual bank. We also propose a strategy to estimate exposure due to interest rate derivatives from regulatory data on notional and fair values together with the history of interest rates.

Download or read book Essays on Macro finance and Innovation written by Mehmet Furkan Karaca and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two chapters of my work on macro-finance and innovation. In particular, it studies the impact of the dynamic process of credit reallocation on aggregate innovative activities. The first chapter introduces the main focus of my dissertation. In addition, it reviews the literature and discusses the contribution of this dissertation.The next chapter builds a model to draw out theoretical predictions. In the model economy, borrowing firms choose whether to innovate or retain a mature technology, while lenders decide their allocation of credit. The credit market is characterized with financial and matching frictions and investigates the consequences of lenders' credit reallocation decisions on borrowers' innovation choices. We posit that the innovation process is time consuming (e.g. due to the length of R&D projects). The different amount of time needed for production with the new and old technology exposes lenders to a liquidity risk. The analysis shows that lenders tend to reallocate credit when they face liquidity risks. We show that an intensification of the credit reallocation process improves the matching between lenders and innovative firms but, overall, it disrupts innovation activities.The final chapter empirically investigates the impact of credit reallocation on innovation and tests the predictions from the model. We use a novel data set on bank balance sheets and the number of patents in Italian (a bank-centered country) local markets (provinces) during a period of great economic growth and tighter banking regulation. We construct measures of credit reallocation following the established literature on job reallocation and examine their effect on innovation. To address the concerns about the endogeneity of credit reallocation in the provinces, we exploit indicators of the geographical diversity of the 1936 Italian Banking regulation. We then estimate a two-stage model that in the first stage projects the rate of credit reallocation in a province onto an indicator of tightness of the banking regulation in the province and in the second stage projects the measure of innovation (the number of patents) onto the value of credit reallocation in the province defined by the tightness of local banking regulation. Consistent with the predictions of the model, we find that an increase in credit reallocation depresses innovative activity while aggregate credit growth helps to expand it. Furthermore, we show that our results are robust across empirical specifications, and carry through when controlling for a broad battery of province characteristics or altering the estimation period.

Download or read book Essays in Financial Economics and Macro Finance written by Jonathan-Julian Federle and published by . This book was released on 2024 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Macro finance written by Xu Tian and published by . This book was released on 2016 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This dissertation studies the macroeconomic consequences of financial frictions via their roles in determining the capital structures of firms and financial institutions. It consists of two papers in this particular field. The first paper focuses on the capital structure decisions of financial intermediaries and their macroeconomic implications. In this paper, titled "Uncertainty and the Shadow Banking Crisis: A Structural Estimation", I examine the impact of asset return uncertainty on the financing and leverage decisions of shadow banks. Shadow banks play an important role in the modern financial system and are arguably the source of key vulnerabilities leading to the 2007-2009 financial crisis. In this paper, I develop a quantitative framework with endogenous bank default and aggregate uncertainty fluctuation to study the dynamics of shadow banking. I argue that the increase in asset return uncertainty during the crisis results in the spread spike, making it more costly for shadow banks to roll over their debt in the short-term debt market. As a result, these banks are forced to deleverage, leading to a decrease in the credit supply. The model is estimated using a bank-level dataset of shadow banks in the United States. The findings show that uncertainty shocks are able to generate statistics and pathways of leverage, spread, and assets which closely match those observed in the data. Maturity mismatch and asset firesales amplify the impact of the uncertainty shocks. First moment shocks alone can not reproduce the large interbank spread spike, dramatic deleveraging and contraction of the US shadow banking sector during the crisis. The model also allows for policy experiments. I analyze how unconventional monetary policies can help to counter the rise in the interbank spread, thus stabilizing the credit supply. Taking into consideration of bank moral hazard, I find that government bailout might be counterproductive as it might result in more aggressive risk-taking of shadow banks. The contribution of this paper is twofold. On the empirical front, I contribute to the literature by being the first in documenting several stylized facts of the U.S. shadow banking industry using a detailed micro-level dataset. On the theoretical front, I contribute to the literature by being the first in building a quantitative model with heterogeneous banks, endogenous bank default, aggregate uncertainty fluctuation and maturity mismatch to characterize the shadow banking dynamics in a full nonlinear manner and quantifying the impact of uncertainty shocks on the shadow banking industry. In the second paper with Yan Bai and Dan Lu, "Do Financial Frictions Explain Chinese Firms' Saving and Misallocation?", we use Chinese firm-level data to quantify financial frictions in China and ask to what extent they can explain firms' saving and capital misallocation. The literature on the effect of financial frictions on capital outflow and misallocation is large, however, it either uses aggregate data or it ignores firms' financing patterns. Few works use micro-level Chinese data to quantify these frictions. This paper fills this gap. We first document features of the data, in terms of firm dynamics and financing. We find that relatively smaller firms have lower leverage, face higher interest rates and operate with a higher marginal product of capital. We then develop a heterogeneous-firm model with two types of financial frictions, default risk and a fixed cost of issuing loans. We estimate the model using evidence on the firm size distribution and financing patterns and find that financial frictions can explain aggregate firm saving, the co-movement between saving and investment across firms, and around 60 percent of the dispersion in the marginal product of capital (MPK). The endogenous financial frictions, however, generate an opposite MPK-size relationship, which has important implications for total factor productivity losses."--Pages iv-v.

Download or read book Essays in Macro finance written by Jiwei Zhang and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of four essays in macro-finance, focusing on the cause and effect of asset prices, inequality, and welfare. In particular, these essays highlight the role of institutions and structural changes in shaping outcomes of asset markets and of the macro-economy. The two overarching objectives of these essays are to analyze mechanisms of asset price movements and to understand how these asset price movements affect the daily lives of people. The four chapters of this dissertation examine the implications of inertia and stock market non-participation for equity prices, risk sharing, and wealth inequality; causal effects of Chinese Communist Party's cadre promotion system on land prices in China; interconnection between homeownership and marriage; fiscal responses to income inequality shocks. The first chapter quantifies the general equilibrium effects of financial innovation that increases access to equity markets. I study an overlapping generations model with both idiosyncratic and aggregate risk, solved with machine learning techniques. A benchmark economy with limited stock market participation and rebalancing frictions matches the current dynamics of macro aggregates, equity and bond returns, as well as wealth and portfolio concentration. A counterfactual experiment shows how widespread adoption of target date funds would improve risk sharing, reduce inequality, and generate substantial welfare gains for households in the bottom 90% of wealth distribution. The equity premium drops from 6.4% to 1.7%, while the standard deviation of equity returns stabilizes from 21.9% to 14.6%. Welfare implications vary with risk aversion and age. In general, the bottom 90% benefit from improved access to equity markets and better risk sharing, while the top 10% su↵er losses in wealth accumulation. Outcomes are very close between an economy with target date funds and one without any participation costs or rebalancing frictions. The second chapter identifies the causal effect of the Chinese Communist Party's performance- based promotion system to the country's real estate boom from 2003 to 2015. City-level leaders prioritizing economic growth allocate land at discounted prices to industrial firms rather than housing developers. Our analysis reveals that personal connections with provincial superiors are crucial for promotion and hence affect local land and housing supply. When city leaders share the same hometown as newly appointed provincial leaders, their chances of promotion increase by 15%, and GDP performances no longer matters. This connection reduces the need for industrial land allocation, resulting in a higher residential land supply in the city. In addition, cities with leaders who have hometown connections experience significantly higher supplies of residential land, and housing price growth rates are also 5% lower in these cities. The third chapter studies the phenomenon of marriage house in China and its effects on demo- graphics and homeownership. We first show empirical evidence for the complementarity between marriage and homeownership: single males with a marriage house (a house where the newlywed can move into) have 70% higher odds of getting married compared to their counterparts who do not have a marriage house. In addition, the timing of home purchase exhibits a clear cut-o↵ around the time of marriage, with the probability of purchasing a house peaking 0-2 years before marriage and slumping immediately after the time of marriage. Moreover, in the cross section, county house prices and average age at marriage are highly correlated in both level and in growth rate. We then quantify the marriage related incentives for homeownership using a lifecycle consumption-savings model with housing demand and ownership-dependent marriage shocks. In a counterfactual world where the marriage-house complementarity is absent, 45% of households under age 45 would delay their home purchases. Removing the marriage house friction from the marriage market would have slowed down the rise in age at first marriage by 40% between 1995 and 2010. Our results suggest that policies directed at either housing affordability or demographics can have significant consequences for both marriage and housing markets in China. Using data on U.S. state and federal taxes and transfers over the last quarter century, the fourth chapter estimates a regression model that yields the marginal effect of any shift of market income share from one quintile to another on the entire post tax, post-transfer income distribution. We identify exogenous income distribution changes and account for reverse causality using instruments based on exposure to international trade shocks, international commodity price shocks and national industry demand shocks, as well as lagged endogenous variables, with controls for the level of income, the business cycle and demographics. We find attenuation initially increases in quintile rank, peaks at the middle quintile and then falls for higher income quintiles, consistent with median voter political economy theory and the Stiglitz Director's law. We also provide evidence of considerable and systematic spillover effects on quintiles neither gaining nor losing in the "experiments, " also favoring the middle quintile. "Voting" and "income insurance" coalition analyses are presented. We find a strong negative relationship between average real income and the degree to which taxes and transfers are heavily redistributive.

Download or read book Summary of the Thesis Essays on Financial Stability and Corporate Finance written by Mónica López-Puertas Lamy and published by Ed. Universidad de Cantabria. This book was released on 2014-01-20 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: El principal objetivo de este trabajo consiste en analizar los efectos que la estructura de propiedad bancaria tiene sobre la toma de riesgos, a nivel microeconómico y sobre el riesgo sistémico, a nivel macroeconómico. Para ello se desarrolla un modelo de competencia oligopolística y se analizan las propiedades del equilibrio de mercado en términos de beneficios, cuota de mercado y micro y macro estabilidad financiera cuando un banco comercial, maximizador de beneficios, compite contra un banco no orientado hacia los beneficios (stakeholder bank). Los resultados teóricos son validados empíricamente usando datos bancarios de 72 países durante el periodo 1997-2007. Concretamente se muestra que a) los stakeholder banks son menos arriesgados que los bancos comerciales, b) cualquier banco es más arriesgado cuando compite contra un stakeholder bank en lugar de contra un banco comercial, c) a nivel sistémico la presencia de stakeholder banks aumenta la estabilidad financiera, d) el efecto de la regulación bancaria y de la competencia en la toma de riesgos depende de la estructura de propiedad del banco, e) la concentración accionarial incrementa el riesgo bancario, f) el diseño de los incentivos gerenciales tiene un efecto muy significativo sobre la toma de riesgos bancarios.

Download or read book Essays on Finance and Macroeconomics written by Sebastian Tariacuri Di Tella and published by . This book was released on 2013 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis studies the role of the financial system in the amplification and propagation of business cycles. Chapter 1 studies the origin and propagation of balance sheet recessions. I first show that in standard models driven by TFP shocks, the balance sheet channel disappears when agents are allowed to write contracts on the aggregate state of the economy. In contrast, I show how uncertainty shocks can drive balance sheet recessions with depressed asset prices and growth, and trigger a "flight to quality" event with low interest rates and high risk-premia. Uncertainty shocks create an endogenous hedging motive that induces financial intermediaries to take on a disproportionate fraction of aggregate risk, even when contracts can be written on the aggregate state of the economy. Finally, I explore some implications for financial regulation. Chapter 2 studies a tractable model of dynamic moral hazard with purely pecuniary private benefits. The agent can trade a productive asset and secretly divert funds to a private account and use them to "recontract": at any time he can offer a new continuation contract to the principal, who accepts if the new contract is attractive. The main result is that the optimal contract can be characterized as the solution to a standard portfolio problem with a simple "skin in the game" constraint. The setting places few restrictions on preferences and the distribution of shocks, distinguishes between (observable) aggregate shocks and (unobservable) idiosyncratic shocks, and takes arbitrary general equilibrium prices as given. This makes the results easily applicable to many macro and financial applications. Chapter 3 explores under what conditions the presence of moral hazard can create a balance sheet amplification channel. If the private action of the agent exposes him to aggregate risk through his unobserved private benefit, the optimal contract will try to over-expose him to aggregate risk to deter him from misbehaving. This creates a tradeoff between aggregate and idiosyncratic risk-sharing. More productive agents naturally want to leverage more and therefore have larger incentives to distort their aggregate risk-sharing in order to reduce their exposure to idiosyncratic risk. In equilibrium, therefore, more productive agents take on a disproportionate fraction of aggregate risk, creating a balance sheet channel.

Download or read book Essays on Normative Macro Finance written by Eduardo Davila-Ramirez and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of four essays that study normative questions on issues related to financial markets and the macroeconomy.

Download or read book Essays on Macro finance written by Jason Hukjae Choi and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter studies how much providing credit lines to firms contributes to bank risk and its welfare implications. I develop a quantitative model in which banks lend to heterogeneous firms both through term loans and credit lines. Credit lines give firms liquidity insurance against crisis times and help overcome financing frictions. At the same time, credit lines also introduce a new channel for banks to be exposed to excessive risk. I estimate the model to match both aggregate and heterogeneous contract data. I find that 20% of bank losses in crisis times can be attributed to credit lines, and that credit lines help stabilize banks during crises. My model suggests banks are over lending in both contracts compared to a planner, but the relative shares of contracts are broadly correct. I find bank capital ratios should be 3% higher and show how to implement optimal policy. Additionally, I show how a model with only term loans would under predict optimal capital ratios. The US government is the dominant supplier of global safe assets and faces a downward sloping demand for its debt. This second chapter (joint with Rishabh Kirpalani and Diego Perez) asks if the US exercises its market power when issuing debt, and we study its macroeconomic consequences. We develop a model of the global economy in which US public debt generates a non- pecuniary value for its holders, analyze the equilibrium in which the US government is the monopoly provider of this safe asset, and contrast this case with the one in which the US government acts as a price taker. We use variation in estimated demand elasticities for US debt during high- and low-volatility regimes to empirically distinguish between these two models and find that the data reject the price-taking behavior in favor of the monopoly one. We then quantify the distortions due to market power and find that it generates a significant underprovision of safe assets, a sizable markup in the convenience yield, and large welfare benefits for the US to the detriment of the rest of the world. Finally, we study the implications of increasing competition in safe assets from other sovereigns and private institutions. In the third chapter (joint with Roberto Robatto), we ask what are the long-term effects of an increase in the supply of Treasury securities on the financial sector and the economy? We assemble a data set spanning 140 years with data about banks, firms' investments, fiscal policy, and other macroeconomic and financial variables. We then employ a VAR analysis to show that a higher supply of Treasury securities relative to GDP (i) reduces bank liabilities and the supply of bank loans, (ii) reduces firms' investments, and (iii) has negative impact on workers and the labor market. We then present a model that rationalizes these findings and allows us to derive policy implications. The current scenario in which the government can borrow at low or negative real rates does not necessarily imply that higher government debt is beneficial.

Download or read book Three Essays on Macro finance written by SungJun Huh and published by . This book was released on 2018 with total page 101 pages. Available in PDF, EPUB and Kindle. Book excerpt: Also, recent financial crises indicate that a significant decline in house prices can reduce confidence of economic agents and cause bank runs and a fire sale. Accordingly, this dissertation investigates the role of housing on the household's attitudes toward risk and derives the closed-form expressions for risk aversion with generalized recursive preferences. This chapter finds that including housing in the utility function lowers risk aversion because housing partially absorbs aggregate shocks to consumption and labor.

Download or read book Essays in Macro Finance and Statistics written by Zhi Jiang Ye and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two chapters on my work in macro-finance, and one chapter on the statistical properties of k-clustering.The first chapter proposes an objective disaster risk measure based on a real economic outcome that captures the tail risks harbored by credit expansions and market booms across three disaster dimensions: crashes in real GDP growth, financial crisis, and equity market crashes. Our findings on the correlation between disaster risk and asset prices substantiate a disconnect between realized tail risks and investors' perceived tail risks, and point to the fragility of rare disaster models proposed in literature. This chapter is based on the working paper "Time Varying Disaster Risk and Asset Prices" with Matt Baron and Wei Xiong.The second chapter presents a study on the role of sectoral credit in aggregate credit booms, financial crises, and crashes in GDP growth. We find that the aggregate credit cycle masks co-existing sectoral credit cycles that individually exhibit different characteristics, and that the use of sectoral credit data substantially improves out-of-sample forecasts of macroeconomic risks. Our findings suggest that using measures of "the" credit cycle for regulatory oversight can be highly misleading. This chapter is based on the working paper "Varieties of Credit Booms" with Karsten Muller and Emil Verner.The third chapter presents a k-clustering procedure based on Lp distance, generalizing the popular k-means and k-medians estimator. We establish novel results on the strong consistency, asymptotic normality, and bootstrap validity of the estimator, and derive concentration bounds and asymptotics of the associated risk criterion. A byproduct of this work is a framework for proving asymptotic normality and bootstrap validity of regular M-estimators that unifies developments in empirical processes. We will derive sufficient conditions based on the combinatorial properties of the risk function class that only require smoothness of expectations of the risk function, thereby enabling one to sidestep the analytical challenges of using the classical stochastic differentiability approach when the risk function is non-smooth and non-convex.

Download or read book Three Essays on Micro and Macroprudential Regulation and the Effects on Bank Conduct and the Real Economy written by and published by . This book was released on 2014 with total page 324 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Micro and Macroprudential Regulation and the Effects on Bank Conduct and the Real Economy written by Piotr Jan Danisewicz and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays in Macro Finance written by David Ciaran Lindsay and published by . This book was released on 2022 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Chapter 1, I use a structural approach, to quantify the effect of land-use regulations on different age and education groups. I estimate a dynamic spatial structural equilibrium model of household location choice, local housing supply, and amenity supply. I show that in the long-run, removing land-use restrictions benefits all household groups and increases aggregate consumption by 7.1%. These consumption gains vary across households, less educated and younger households see increases in consumption about twice as large as more educated or older households. In contrast, in the short-run, removing land-use regulations reduces the consumption of older-richer homeowners while increasing the consumption of younger renters. In a counterfactual 1990-2019 transition, abolishing land-use regulations reduces the consumption of households born before the mid-1960s, while increasing consumption of more recent generations. In Chapter 2, co-authored with Mahyar Kargar, Benjamin Lester, Shuo Liu, Pierre-Olivier Weill, Diego Zuniga, we study liquidity conditions in the corporate bond market during the COVID-19 pandemic. We document that the cost of trading immediately via risky-principal trades dramatically increased at the height of the sell-off, forcing customers to shift toward slower agency trades. Exploiting eligibility requirements, we show that the Federal Reserve's corporate credit facilities have had a positive effect on market liquidity. A structural estimation reveals that customers' willingness to pay for immediacy increased by about 200 bps per dollar of transaction, but quickly subsided after the Fed announced its interventions. Dealers' marginal cost also increased substantially but did not fully subside. In Chapter 3, co-authored with Diego Zuniga, we study inter-dealer trading patterns in the US corporate bond market. We document that dealers trade with only a small group of other dealers and that this group of dealers is highly persistent over time. We show that the longer a dealer pair have been trading the more likely that they will continue to trade and the larger the bilateral volume traded between them. We measure trading costs between dealers and show that stronger relationship leads to lower trading costs. Motivated by our empirical work we develop a structural model of trading relationships. The existence of double marginalization leads to inefficiency. We show that the repeated nature of the interactions between dealers allows them to form relationships and hence restore optimality.

Download or read book Essays in Macro finance written by Sean Alexander Myers and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation analyzes various aspects of financial markets and fiscal policy. The first chapter, Public Employee Pensions and Municipal Insolvency, studies how municipal governments jointly manage spending, credit market borrowing, and a public employee pension system. I model governments as levered investors who must meet non-defaultable pension obligations and may value government spending more than citizens. I quantify the model using data on California cities, including a new record of fiscal emergencies, tax increases required to maintain essential city services. After the financial crisis depleted pension funds, cities engaged in excessive risk-taking: the fiscal emergency option encouraged gambling for resurrection that kept cities vulnerable to shocks well into the recovery. To correct this problem, a spending cap works better than a restriction on risk-taking. The second chapter, Subjective Cash Flow and Discount Rate Expectations, is co-authored with Stanford PhD student Ricardo De la O. This chapter focuses on a central question in finance: why do stock prices vary? Using survey forecasts, we find that cash flow growth expectations explain most movements in the S& P 500 price-dividend and price-earnings ratios, accounting for at least 93% and 63% of their variation. These expectations comove strongly with price ratios, even when price ratios do not predict future cash flow growth. In comparison, return expectations have low volatility and small comovement with price ratios. Short-term, rather than long-term, expectations account for most price ratio variation. We propose an asset pricing model with beliefs about earnings growth reversal that accurately replicates these cash flow growth expectations and dynamics. The third chapter, Sovereign Debt, Government Spending Cycles, and Back-loaded Pension Reforms, studies the effect of public pension obligations on a sovereign government's commitment to repaying debt. In the model, the government can renege on its pension promises but suffers a cost from losing the trust of households about future pensions. Large pension promises act as a commitment device for debt because they require the government to have regular access to credit markets. The government's decision to default is driven by its total obligations, not just its debt. Thus, there is a range of pension obligations large enough to act as a commitment device without raising total obligations to the point of default. This otherwise deterministic economy has an endogenous cycle in which periods of high spending and increasing debt are followed by periods of pension reform and debt reduction. The model successfully produces high debt in excess of 100% GDP without default and back-loaded pension cuts that match salient features of recent reforms in six EU nations.

Download or read book Essays on Financial Regulation Stability and Inequality written by Maria Alejandra Amado Garfias and published by . This book was released on 2021 with total page 127 pages. Available in PDF, EPUB and Kindle. Book excerpt: Evidence has shown that regulatory policies aimed at achieving financial stability disproportionally affect firms facing tighter borrowing constraints. However, little is known about the consequences of these policies in dollarized economies, where cheaper dollar financing plays a crucial role in relaxing small firms' borrowing constraints. Furthermore, the impact of these policies on income distribution has remained unexplored in the literature. In Chapter 1, I propose a theoretical mechanism to understand the effects of a tax on foreign currency financial intermediation. I analyze the equilibrium of a credit market game in which currency mismatch acts as a means for relaxing small firms' borrowing constraints. I show that a tax on dollar lending negatively affects the total debt of constrained (small) firms, while it only has compositional effects on total debt of unconstrained (large) firms. In Chapter 2, I study the implementation of a macroprudential FX tax by the Central Bank of Peru. I build a novel dataset that combines confidential data on the universe of loans granted by Peruvian banks to nontradable firms and a confidential dataset on the universe of all formally registered firms. Exploiting the heterogeneity in the strictness of the tax among banks, I provide causal evidence of the heterogeneous effects of this tax on firms of different sizes. I find that a 10% increase in bank exposure to the tax significantly increases disparities in the growth of total loans between small and large firms by 1.5 percentage points. When accounting for firms switching to soles financing from different banks, the effect on large firms financing is only compositional. Chapter 3 explores the links between macroprudential policies and labor income inequality. I develop a survey of two strands of the literature that have remained disconnected thus far: First, the literature that explores the heterogeneous effects of banking regulation and capital controls on firms of different sizes. And second, the literature that studies the drivers of the firm size wage puzzle, and the implications of firm demography on income inequality. I conjecture that, by disproportionally hurting small firms' financing and growth possibilities, macroprudential policies can contribute to increase labor income inequality.

Download or read book Essays on Financial Regulation written by Mauricio Naranjo and published by . This book was released on 1995 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt: