Download or read book Essays in Household Finance and Macroeconomics of Heterogeneous Agents written by Mengli Sha and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation develops and estimates structural models with heterogeneous agents to understand empirical patterns from micro data that have important aggregate implications. The first two chapters study the aggregate impacts and distributional effects of credit supply shocks from banks and nonbank financial institutions on consumer durable expenditures. Subprime auto lending is concentrated in nonbank lenders. During the Great Recession, nonbank subprime auto lending declined dramatically vis-à-vis banks loans. The first chapter documents these facts and studies in detail how banks and nonbanks offer different loan rate schedules to different borrowers. Motivated by these facts, the second chapter embeds a novel ingredient of endogenous lender choices into a dynamic equilibrium model with heterogeneous households and lenders. The estimated model generates a 21% decline in auto sales triggered by nonbank credit supply shocks and income shocks and attributes approximately 37% of the collapse of the U.S. auto sales during the Great Recession to nonbank credit supply shocks, whereas the contribution of a bank credit supply shock of the same magnitude would have been merely 0.28%. Moreover, this analysis highlights different distributional implications of bank and nonbank credit supply shocks through a new mechanism: asymmetric ability to borrow. This concept captures the limited flexibility in the lender choices of nonbank borrowers, which negatively affects nonbank borrowers' car purchasing behaviors but not those of bank borrowers. Consequently, nonbank credit supply shocks have much larger impacts on durable expenditures, compared to bank shocks. These results cast light on the effectiveness of the Term Asset-Backed Securities Loan Facility (TALF), the emergency lending program that alleviated panic in the asset-backed securities market during the Great Recession: Without this program, auto sales could have dropped substantially more. The third chapter studies the role of overconfidence in households' stock portfolio adjustment decisions. Barber and Odean (2000) find that households who trade stocks more have a lower net return and attribute this pattern to irrationality, specifically overconfidence. In contrast, we find that household financial choices generated from a dynamic optimization problem with rational agents and portfolio adjustment costs can reproduce the observed distribution of household turnover rates as well as the observed pattern that households with the highest turnover rates have the lowest net returns. Various forms of irrationality, modeled as beliefs about income and return processes that are not data based, do not improve the ability of the baseline model to explain these turnover and net return patterns.

Download or read book Essays in Dynamic Household Finance with Heterogeneous Agents written by and published by . This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Household Finance and Macroeconomics written by Franco Zeccchetto and published by . This book was released on 2017 with total page 248 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter, we analyze the removal of the credit-risk guarantees provided by the Government Sponsored Enterprises (GSEs) in a model with agents heterogeneous in income and house price risk. We find that wealth inequality increases, driven by higher mortgage spreads and housing rents. Housing holdings become more concentrated. Foreclosures fall. The removal benefits high-income households while hurting low and mid-income households (renters and highly leveraged mortgagors with conforming loans). GSE reform requires compensating transfers, sufficiently high elasticity of rental supply, or linking GSE reform with the elimination of the mortgage interest deduction.

Download or read book Three Essays in Macroeconomics and Finance written by Yang Li and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1 develops a continuous-time, heterogeneous agents version of the Barro-Rietz rare disasters model. Following Gabaix (2012), the disaster probability is assumed to be time-varying. The economy consists of two types of agents: (1) a "rational" agent, who updates his beliefs using Bayes Rule, and (2) a "robust" agent, who updates his beliefs using a pessimistically distorted prior. Following Hansen and Sargent (2008), pessimism is disciplined using detection error probabilities. Disaster risk is assumed to be nontradeable. The model is calibrated to US data, and focuses on three disaster episodes: (1) The Great Depression of 1929-33, (2) The Financial Crisis of 2008-09, and (3) The Covid Pandemic of 2020. The key contribution of the paper is to show that the model can replicate the observed spike in trading volume that occurs during disasters. Trading produces endogenous low frequency dynamics in the distribution of wealth. The relative wealth of robust agents gradually declines during normal times, but rises sharply during disasters. These results sound a note of caution when interpreting short-run movements in the distribution of wealth. Chapter 2 examines the market selection hypothesis in a continuous time asset pricing model with jumps. It is shown that the hypothesis is valid when agents have log preferences. The result is robust as it does not depend on whether markets are incomplete. Jumps affect long-run wealth dynamics through a redistribution channel: Disasters lead to large wealth redistribution as agents with heterogeneous beliefs about disasters have different exposures to risky assets. Using tools from ergodic theory, I prove a novel result that generalizes the rationality concept in the existing literature: an agent endowed with the optimal filter will outperform other agents in complete financial markets asymptotically. Chapter 3, a joint paper with Xiaowen Lei, develops a continuous-time overlapping generations model with rare disasters and agents who learn from their own experiences. Using microdata about household finance in China, we establish that economic disasters such as the Great Leap Forward make investors distrustful of the market. Generations that experience disasters invest a lower fraction of their wealth in risky assets, even if similar disasters are not likely to occur again during their lifetimes. "Fearing to attempt" therefore inhibits wealth accumulation by these "depression babies" relative to other generations.

Download or read book Essays on Household Heterogeneity in Macroeconomics written by Lukas Nord and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contains four independent essays studying the consequences of household heterogeneity for Macroeconomics. The first chapter studies the implications of household heterogeneity for equilibrium prices. I break with the canonical assumptions of homothetic preferences and the law of one price to show how heterogeneity in consumption baskets and search for price bargains affects posted prices. Analytical results from search theory and empirical evidence from big data on households' grocery transactions show that price distributions respond to the composition of buyers. In a quantitative heterogeneous agent model with endogenous price dispersion for multiple varieties, I find that the response of retailers to households' search effort is quantitatively important to differentiate between inequality in expenditure and consumption. It more than doubles the direct effect of paying more or less given posted prices, which has been the focus of previous literature. Furthermore, I find that household heterogeneity helps to account for the empirical cyclicality of retail prices and markups in response to aggregate shocks, and has implications for the response of prices to redistributive policies. In the second chapter, which is joint work with Annika Bacher and Philipp Grübener, we show how households with two members can insure themselves against the job loss of a primary earner through the labor force entry of a nonparticipating spouse. We document empirically that this margin is predominantly used by young households. In a two-member life cycle model with endogenous arrival rates, human capital accumulation, and extensive-margin labor supply, we explore how differences in labor market opportunities and asset holdings contribute to this pattern. Our findings suggest that the age difference is predominantly explained by better insurance through asset holdings for the old, while differences in arrival rates and human capital play a smaller role. In the third chapter, which is joint work with Caterina Mendicino and Marcel Peruffo, we study differences in the exposure to bank distress along the income distribution. We develop a two-asset heterogeneous agent model with a financial sector and use this framework to show that banking sector losses disproportionately harm low-income households while rich households adjust their savings behavior to profit from fluctuations in asset prices. This is why welfare losses from bank distress are considerably more dispersed than consumption responses. We find the model-implied consumption responses to be in line with empirical evidence on the relationship between bank equity returns and consumption across households. In the forth chapter, I study how wealth holdings can affect households' incentives to form precise expectations about future inflation rates. I document empirically how the dispersion of expectations changes along the wealth distribution and develop a consumption-savings model with costly expectation formation to study implications for the effectiveness of forward guidance policies. I show endogenous expectation formation to significantly lower the effectiveness of forward guidance policies due to selection in which households are paying attention to news about inflation.

Download or read book Essays on Topics in Business Cycle Macroeconomics with Heterogeneous Agents written by Florian Kuhn and published by . This book was released on 2015 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation investigates several business cycle relationships when economic agents are heterogeneous. The particular focus is on the interactions between the cross-section of agents and the aggregate state of the economy. The first chapter shows that, when occasionally binding capacity constraints limit the production of heterogeneous firms, demand shocks can endogenously generate a number of important business cycle regularities: recessions are deeper than booms are high, firm-level volatility is countercyclical, the aggregate Solow residual is procyclical and the fiscal multiplier is countercyclical. A baseline calibration of a basic New Keynesian DSGE model with capacity constraints shows that this mechanism can explain more than a quarter of the empirically observed asymmetry in output, and matches the cyclicality of firm-level profitability dispersion and of the measured Solow residual. The model implies fluctuations in the fiscal multiplier of around 0.12 between expansions and recessions. Chapter two takes a different approach to firm level uncertainty, exploring how recessions can cause an endogenous rise in firm risk. If heterogeneous firms face real and financial frictions, then a shock to the mean of aggregate productivity endogenously leads to countercyclical profitability risk through firms' heterogeneous responses in price setting. Additionally, the mechanism endogenously generates countercyclical credit spreads and credit spread dispersion. The model explains a large share of the observed fluctuations in profitability dispersion (69%) and in credit spreads (40%) through fluctuations in aggregate TFP holding productivity risk constant. This suggests that the scope for uncertainty shocks to explain recessions may be smaller than previously thought. The third chapter focuses on distributional effects of oil price shocks on the household side. In the model, household behavior replicates two patterns found in household-level data which show that gas consumption increases with income, but on the intensive margin gasoline consumption as a share of the household's budget decreases with income. The model includes gas consumption in household utility on top of a fixed minimum level of gas consumption. Calibrated simulations suggest that a shock to the gas price is almost twice as costly for relatively poor households than for relatively rich households.

Download or read book Essays in Public Economics and Financial Macroeconomics written by Rafael Barbosa and published by . This book was released on 2021 with total page 140 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter of the thesis is entitled A Brief History of Land Value Taxation in Economic Theory. The issue of land rents and their taxation through a land value tax (LVT) was as a hotly debated topic in economic theory since classical age and until the early twentieth century, when it mostly vanished as a research subject. I provide a brief history of the evolution of the concept of land value taxation in economic theory in order to understand the reasons why it fell out of favor as a research subject in the literature. I identify this outcome as being a consequence of developments both inside and outside academia. The second chapter is entitled Tax Housing or Land? Distributional Effects of Property Taxation in Germany. Despite its theoretical merits, Land Value Taxation is not a common policy instrument. One of the main reasons is uncertainty regarding its distributional impacts. Using a general equilibrium model with heterogeneous agents calibrated to an unique household level dataset of German homeowners in 2017, we assess the distributional effects of replacing a housing tax with a LVT. Our data shows the share of land value in property value is 33%, on average, with considerable household heterogeneity, both within and across regions, and within income levels. We add to the empirical literature by showing land values are more concentrated than property values, but, within regions, not as strongly correlated with income, making it less progressive than a standard property tax for homeowners. Our model is the first to allow for an efficiency-equity trade-off from the introduction of a revenue neutral LVT. Results from the model show the introduction of a LVT increases residential investment substantially, reducing housing rents and benefiting renters. It also leads to migration from urban regions, promoting regional convergence. Landowners with high land holdings lose, in general, but most other landowners across income levels benefit, especially in non-urban regions. Overall, introduction of a LVT increases welfare, despite a minor regressive tendency in urban regions for homeowners. The third chapter is entitled Credit Spirals: Spillovers between Firm and Household Borrowing in a Small Open Economy. The paper deals with an open economy model of financial crisis with sudden stops, but featuring both household and firm borrowing. So far, the literature has mostly ignored the effects of joint borrowing for financial stability. The model features occasionally binding borrowing constraints and shows how borrowing decisions in one sector can reinforce standard capital flows and increase the volatility of collateral asset through strategic complementarities, beyond what standard financial accelerator models would predict. These spillovers can lead to sharper reductions in borrowing and consumption during sudden stop events.

Download or read book Essays in Quantitative Macroeconomics written by Hanno Kase and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three essays in quantitative macroeconomics. In Chapter 1, joint with Leonardo Melosi and Matthias Rottner, we leverage recent developments in machine learning to develop methods to solve and estimate large and complex nonlinear macroeconomic models, e.g. HANK models. Our method relies on neural networks because of their appealing feature that even models with hundreds of state variables can be solved. While likelihood estimation requires the repeated solving of the model, something that is infeasible for highly complex models, we overcome this problem by exploiting the scalability of neural networks. Including the parameters of the model as quasi state variables in the neural network, we solve this extended neural network and apply it directly in the estimation. To show the potential of our approach, we estimate a quantitative HANK model that features nonlinearities on an individual (borrowing limit) and aggregate level (zero lower bound) using simulated data. The model also shows that there is an important economic interaction between the impact of the zero lower bound and the degree of household heterogeneity. Chapter 2 studies the impact of macroprudential limits on mortgage lending in a heterogeneous agent life-cycle model with incomplete markets, long-term mortgage, and default. The model is calibrated to German economy using Household Finance and Consumption Survey data. I consider the effects of four policy instruments: loan-to-value limit, debt-toincome limit, payment-to-income limit, and maximum maturity. I find that their effect on homeownership rate is fairly modest. Only the loan-to-value limit significantly reduces the homeownership rate among young households. At the same time, it has the largest positive welfare effect. Chapter 3 explores applications of the backpropagation algorithm on heterogeneous agent models. In addition, I clarify the connection between deep learning and dynamic structural models by showing how a standard value function iteration algorithm can be viewed as a recurrent convolutional neural network. As a result, many advances in the field of machine learning can carry over to economics. This in turn makes the solution and estimation of more complex models feasible.

Download or read book Essays in Finance and Macroeconomics written by Pedram Jahangiry and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Macroeconomics written by Annika Bacher and published by . This book was released on 2022 with total page 158 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis is composed of three independent essays in heterogeneous agent macroeconomics. They all explore how family structure affects investment choices and labor market outcomes of individuals. The first chapter, Housing and Savings Behavior Across Family Types, studies how family structure in the form of marital status and changes thereof affect housing demand. I develop a life-cycle model of housing and financial portfolio choice with dynamic and heterogeneous family types that I calibrate to household survey data from the United States. My findings indicate that divorce risk encourages precautionary savings of couples and reduces their demand risky assets and for indivisible housing. Prospective marriage, lower income levels and larger exposure to income fluctuations prevent singles from becoming homeowners. As a result, abstracting from distinct family types overstates the effectiveness of housing policies such as lowering property taxes and reducing housing transaction costs by up to over 100%. This misspecification is largest among young households, who are most likely to be single and whose marital transition risk is highest. In contrast, regulations that facilitate stock market participation help to foster wealth accumulation, because they encourage investment in high return assets that are cheaper to liquidate in the event of a marital or labor income shock. In the second chapter, The Gender Investment Gap over the Life-Cycle, I document with data from the Survey of Consumer Finances that single women hold on average less risky portfolios than single men. To understand the sources of this "Gender Investment Gap", I develop a life-cycle model of portfolio choice that allows for gender differences along observable characteristics and stochastic processes. The model is able to replicate the empirical patterns without introducing gender heterogeneity in preferences. Counterfactual simulations reveal that lower income levels and larger household sizes (mainly through the presence of children) of single women make it optimal for them to invest less risky. Hence, the gender wage gap gets amplified because it results in investment behavior that pays on average lower returns. Importantly, not only current-period income levels and number of household members help to explain this finding but also expectations over their future realizations. The third chapter, Joint Search over the Life-Cycle, co-authored with Philipp Grübener and Lukas Nord, focuses on labor market outcomes and couples. Specifically, we study how intra-household insurance against individual job loss through increased spousal labor market participation, also called the added worker effect, varies over the life cycle. First, we show in U.S. data that the added worker effect is much stronger for young than for old households. A stochastic life cycle model of two-member households with job search in a frictional labor market is capable of replicating this finding. The model suggests that a lower added worker effect for the old is driven primarily by better insurance through asset holdings. Human capital differences between employed young and old contribute to the difference but are quantitatively less important, while differences in job arrival rates play a limited role.

Download or read book Essays on Macroeconomic Policies and Household Heterogeneity written by Gergő Motyovszki and published by . This book was released on 2021 with total page 156 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis is composed of three independent chapters, but all centered around the broader topic of how macroeconomic policies interact with various aspects of household heterogeneity. Monetary Policy and Inequality under Labor Market Frictions and Capital-Skill Complementarity We provide a new channel through which monetary policy has distributional consequences at business cycle frequencies. We show that an unexpected monetary easing increases labor income inequality between high and less-skilled workers. In particular, this effect is prominent in sectors intensive in less-skilled labor, that exhibit high degree of capital-skill complementarity (CSC) and are subject to matching inefficiencies. To rationalize these findings we build a New Keynesian DSGE model with asymmetric search and matching (SAM) frictions across the two types of workers and CSC in the production function. We show that CSC on its own introduces a dynamic demand amplification mechanism: the increase in high-skilled employment after a monetary expansion makes complementary capital more productive, encouraging a further rise in investment demand and creating a multiplier effect. SAM asymmetries magnify this channel. Monetary-Fiscal Interactions and Redistribution in Small Open Economies Ballooning public debts in the wake of the covid-19 pandemic can present monetary-fiscal policies with a dilemma if and when neutral real interest rates rise, which might arrive sooner in emerging markets: policymakers can stabilize debts either by relying on fiscal adjustments (AM-PF) or by tolerating higher inflation (PM-AF). The choice between these policy mixes affects the efficacy of the fiscal expansion already today and can interact with the distributive properties of the stimulus across heterogeneous households. To study this, I build a two agent New Keynesian (TANK) small open economy model with monetary-fiscal interactions. Targeting fiscal transfers more towards high-MPC agents increases the output multiplier of a fiscal stimulus, while raising the degree of deficitfinancing for these transfers also helps. However, precise targeting is much more important under the AM-PF regime than the question of financing, while the opposite is the case with a PM-AF policy mix: then deficit-spending is crucial for the size of the multiplier, and targeting matters less. Under the PM-AF regime fiscal stimulus entails a real exchange rate depreciation which might offset "import leakage" by stimulating net exports, if the share of hand-to-mouth households is low and trade is price elastic enough. Therefore, a PM-AF policy mix might break the Mundell-Fleming prediction that open economies have smaller fiscal multipliers relative to closed economies. Weak Wage Recovery and Precautionary Motives after a Credit Crunch During the economic recovery following the financial crisis many advanced economies saw subdued wage dynamics, in spite of falling unemployment and an increasingly tight labour market. We propose a mechanism which can account for this puzzle and work against usual aggregate demand channels. In a heterogeneous agent model with incomplete markets we endogenize uninsurable idiosyncratic risk through search-and-matching (SAM) frictions in the labour market. In this setting, apart from the usual precautionary saving behaviour, households can self-insure also by settling for lower wages in order to secure a job and thereby avoid becoming borrowing constrained. This channel is especially pronounced for asset-poor agents, already close to the constraint. We introduce a credit crunch into this framework modelled as a gradual tightening of the borrowing constraint (and utilizing a continuous time approach, known as HACT). The perfect foresight transition dynamics feature falling wages despite a tightening labour market and expanding employment. As households suddenly find themselves closer to the borrowing constraint, the increased precautionary motive drives them to accept lower wages in the bargaining process, while firms respond to this by posting more vacancies, leading to a tighter labour market and falling unemployment. If the household deleveraging pressure is persistent enough after the credit crunch, it can explain the weak wage recovery in spite of already stronger aggregate demand.

Download or read book Essays on Household Finance and the Macroeconomy written by Young-Joon Park and published by . This book was released on 2009 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Household Finance and Housing Economics written by Cindy K. Soo and published by . This book was released on 2013 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Macroeconomics with Heterogeneous Agents written by Min Fang (Economist) and published by . This book was released on 2021 with total page 147 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This dissertation consists of essays addressing the macroeconomic outcomes of heterogeneous agent general equilibrium models with micro-level frictions. Each chapter employs both empirical and quantitative macroeconomic methods. The first chapter studies the impact of elevated volatility on the effectiveness of monetary policy on aggregate investment under firm-level capital adjustment costs. I argue that monetary policy is less effective at stimulating investment during periods of elevated volatility in firm-level TFP than during normal times. Empirically, I document that high volatility weakens investment responses to monetary stimulus. I then develop a heterogeneous firm New Keynesian model with lumpy investment to interpret these findings. In the model, non-convex capital adjustment costs create a sizable extensive margin of investment which is more sensitive to changes in both interest rate and volatility than the intensive margin. When volatility is high, firms tend to stay inactive at the extensive margin, so monetary stimulus motivates less investment at the extensive margin. I find that the quantitative implications of the model are primarily shaped by the specifications of the capital adjustment costs. Unlike much of the prior literature, I use the dynamic moments of investment to identify this key model element. Based on this parameterization, high volatility reduces the effectiveness of monetary stimulus for investment by 30%. This reduction is about half of what I find in the data. Therefore, the effect of monetary policy depends on both the lumpy nature of firm-level investment and fluctuations in volatility. The second chapter studies the role of migration and housing constraints in determining income inequality within and across Chinese cities. Combining microdata and a spatial equilibrium model, we quantify the impact of the massive spatial reallocation of workers and the rapid growth of housing costs on the national income distribution. We first show several stylized facts detailing the strong positive correlation between migration inflows, housing costs, and imputed income inequality among Chinese cities. We then build a spatial equilibrium model featuring workers with heterogeneous skills, housing constraints, and heterogeneous returns from housing ownership to explain these facts. Our quantitative results indicate that the reductions in migration costs and the disproportionate growth in productivity across cities and skills result in the observed massive migration flows. Combining with the tight land supply policy in big cities, the expansion of the housing demand causes the rapid growth of housing costs, and enlarges the inequality between local housing owners and migrants. The counterfactual analysis shows that if we redistribute land supply increment by migrant flow and increase land supply toward cities with more migrants, we could lower the within-city income inequality by 14% and the national income inequality by 18%. Meanwhile, we can simultaneously encourage more migration into higher productivity cities"--Pages vii-viii.

Download or read book Essays on Household Finance written by Bruno Ferman and published by . This book was released on 2012 with total page 126 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays. The first chapter studies whether credit demand is sensitive to interest rates, to the prominence of interest rate disclosure, and to nudges. Consumer credit regulations usually require that lenders disclose interest rates. However, lenders can evade the spirit of these regulations by concealing rates in the fine print and highlighting low monthly payments. I explore the importance of such evasion in Brazil, where consumer credit for lower and middle income borrowers is expanding rapidly, despite particularly high interest rates. By randomizing contract interest rates and the degree of interest rate disclosure, I show that most borrowers are highly rate-sensitive, whether or not interest rates are prominently disclosed in marketing materials. An exception is high-risk borrowers, for whom rate disclosure matters. These clients are rate-sensitive only when disclosure is prominent. I also show that borrowers who choose this type of financing are responsive to nudges that favor longer-term plans. Despite this evidence, the financial consequences of information disclosure, even for high-risk borrowers, are relatively modest, and clients are less susceptible to nudges when the stakes are higher. Together, these results suggest that consumers in Brazil are surprisingly adept at decoding information even when lenders try to obfuscate the interest rate information, suggesting a fair amount of sophistication in this population. The second chapter (co-authored with Leonardo Bursztyn, Florian Ederer, and Noam Yuchtman) studies the importance of peer effects in financial decisions. Using a field experiment conducted with a financial brokerage, we attempt to disentangle channels through which a person's financial decisions affect his peers'. When someone purchases an asset, his peers may also want to purchase it because they learn from his choice ("social learning") and because his possession of the asset directly affects others' utility of owning the same asset ("social utility"). We randomize whether one member of a peer pair who chose to purchase an asset has that choice implemented, thus randomizing possession of the asset. Then, we randomize whether the second member of the pair: 1) receives no information about his peer, or 2) is informed of his peer's desire to purchase the asset and the result of the randomization determining possession. We thus estimate the effects of: (a) learning plus possession, and (b) learning alone, relative to a control group. In the control group, 42% of individuals purchased the asset, increasing to 71% in the "social learning only" group, and to 93% in the "social learning and social utility" group. These results suggest that herding behavior in financial markets may result from social learning, and also from a desire to own the same assets as one's peers. The third chapter (co-authored with Pedro Daniel Tavares) uses data on checking and savings accounts for a sample of clients from a large bank in Brazil to calculate the prevalence and cost of "borrowing high and lending low" behavior in a setting where the spread between the borrowing and saving rates is on the order of 150% per year. We find that most clients maintain an overdrawn account at least one day a year while having liquid assets. However, the yearly amount of avoidable financial charges would only correspond, on average, to less than 0.5% of clients' yearly earnings. We also show that consumers are less likely to engage in such behavior when the costs of doing so are higher. These results suggest that the spread between the borrowing and saving rates is a key determinant of this behavior.

Download or read book Essays in Household Finance written by Claudia Robles Garcia and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Household Finance and Banking written by Matteo Benetton and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: