Download or read book Three Essays on International Goods and Financial Markets written by Tuvana Demirden and published by . This book was released on 1995 with total page 158 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on International Financial Markets written by Ling Feng and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The dissertation studies two relevant topics in international financial markets. Why has the bias of equity portfolios towards domestic assets (the "equity home bias" puzzle) remained substantial? To what degree has the financial system as an independent source of uncertainty impacted the real economy, especially regarding the international trade? Chapter 1 proposes a dynamic stochastic general equilibrium (DSGE) model in which shocks to consumption tastes ("taste shocks") are an effective explanation for the equity home bias. The mechanism is that home assets provide a nice insurance property, which is not offered by foreign assets, for home agents to hedge against domestic taste shocks. The model finds that home equity bias positively relies on the persistence and the volatility of domestic taste shocks. Chapter 2 is devoted to presenting empirical evidence on the impacts of taste shocks on international portfolio allocations. The model described in Chapter 1 provides a structure with empirical implications, in that the equilibrium portfolio can be written as the sum of two conditional covariance-variance ratios based on a long-run horizon with all determinants observable. Using VAR estimation results, the empirical evidence suggests that models based on hedging against taste risks are more consistent with data than competing models based on labor income risks. Chapter 3, a joint work with Ching-Yi Lin, studies the impacts of credit crunch on the extensive margin and intensive margin of exports both empirically and theoretically. Panel regressions in the study reveal that a negative financial shock discourages exports by reducing the variety of goods exported as well as the export volume of each individual good. A DSGE model is developed to understand this finding, featuring financial shocks, enforcement constraint and firm entry. As the credit crunch happens, the costs of borrowing to finance firms' exports increase. It reduces individual firms' exports as well as aggregate exports and discourages firms' entry into the export market. The model can also explain the fact that trade dropped more than domestic production and GDP as observed in the most recent financial crisis.

Download or read book Essays on International Comovements of Financial Markets written by Yusuke Tateno and published by . This book was released on 2011 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: International portfolio diversification is beneficial only if asset returns are not significantly correlated across countries. Therefore, it is essential for investors who want to make an appropriate portfolio selection to understand the nature of asset return correlations. This thesis consists of three essays on international comovements of financial markets. The first essay analyzes the effects of heterogeneous beliefs and learning on international comovements of equity returns and portfolio rebalancing mechanism. This essay develops a continuous-time general equilibrium model in a two-asset and two-good economy with two representative agents, who differ in perceived rates of output growth and accuracy of beliefs. The equilibrium correlations of equity returns across counties and optimal portfolios are expressed in terms of the differences in beliefs. The main findings are: (1) the differences in perceived rates of output growth generate equity home or foreign bias, resulting in lower crosscountry equity return correlations; and (2) the volatilities of optimal portfolios and capital flows increase with the differences in perceived output growth and with the differences in accuracy of beliefs. The second essay studies the effects of trade costs in goods market on international comovements of equity markets and those on equity home bias. This essay develops a continuous-time general equilibrium model in a two-country, two-asset, and two-good setting where international trade of goods is costly. I solve for the optimal portfolios and the equilibrium correlations of cross-country equity returns and analyze how they change depending on the size of trade costs, the coeiffcient of risk aversion, and the elasticity of substitution between domestic and foreign goods. It is found that the cross-country equity return correlations decrease with the size of trade costs. This result is robust to different sizes of trade costs and asymmetry related to potential growth and consumer preferences. It is also found that the size of the trade costs and other parameter values determine whether trade costs would generate equity home bias or foreign bias. The third essay is devoted to an empirical analysis of the effects of financial integration on international comovements of financial markets. The essay provides a characterization of synchronization among 24 countries over the period 1980-2003. A country-pair panel instrumental variables framework is employed to explain time-varying bilateral correlations among national stock returns, by utilizing the dataset on trade costs in Fitzgerald (2008). It is found that finnancial integration driven by reduction of trade costs leads to a higher degree of synchromization across stock markets.

Download or read book Three Essays on International Economics written by Shu-Wing Eddery Lam and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation comprises of three essays in international macroeconomics. The first essay investigates the competition between two city states, both of which will stand in place of countries in the global scheme. Under the framework of the three-stages-game, we assume that there are two cities competing for dominance over two sectors: the manufacturing sector and the nancial sector. In addition, the government of each city state can build infrastructure to increase the competitiveness of the financial and distributive firms of its city. Under this framework, we are able to show that the amount of resources, the start-up costs of providing services, and the relative e ectiveness of their infrastructures determine the optimal amounts of infrastructures the cities decide to build, and thus also decide the equilibrium outcome of this game. In my second essay, we examine the relationship between income distribution and import patterns. The Linder hypothesis states that countries with similar economic characteristics should trade more often. However, although the total volumes of trade between these countries are similar, the traded goods may be different. This paper investigates the trading patterns of countries with similar characteristics. Specifically, we analyze the relationship between the import patterns and income distributions of importers. We develop an import similarity index to portray the composition of imports and utilize the idea of a "market overlap," a theoretical concept proposed by Bohman and Nilsson (2007), to represent the similarity of income distributions across different importing countries. We provide empirical evidence to support the notion that countries with similar income distributions display similar import patterns. We also separate countries by income level and find that income distribution exerts a positive impact on the similarity of import patterns for all but low income countries. Finally, we incorporate the characteristics of goods into our analysis and show that the positive relationship between income distributions and import patterns holds for differentiated and reference-priced goods, but not for homogeneous goods. In my final essay, we look into another aspect of international literature: the exchange rate. In the literature, we find that vector autoregressive (VAR) models and impulse response analyses are common tools to study the relationship between monetary policy and exchange rate movements. Therefore, it is important to investigate the accuracy of the VAR model. In the first part of this essay, we assume that the true, underlying, data-generating process is hump-shaped, which is the shape of the impulse response of exchange rate to a monetary policy shock. We show that results estimated from any VAR models applying AIC as their lags selection are biased. We also introduce two possible solutions to remedy this bias: the use of more lags in the VAR models or the use of the proposed loss functions estimations. These results suggest we should be cautious when interpreting empirical evidences on international literature. In the second part of the same essay, we investigate another issue that is closely related to the exchange rate and the VAR model. Under the estimation of the VAR model, the researcher implicitly assumes that the objective loss function is quadratic. However, it is a well accepted fact that monetary authority adjusts the interest rate according to policy. One of the objectives of the monetary authority is to influence the exchange rate in their favor. They estimate the size of the loss caused by deviations from the current exchange rate to the rate they desire, and then they adjust the amount of money in the international market. We propose an asymmetric loss function that monetary authorities may use to estimate the impulse response of the exchange rate to a contractionary monetary policy shock. We then compare these estimated impulse response functions to those estimated by the VAR. We find that while both of these estimated impulse response functions share the same sign, the magnitude and the duration of the shock are quite different. These results suggest that the VAR model may not be appropriate in estimating the exchange rate movement.

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.

Download or read book Three Essays in International Macroeconomics written by Cosimo Pancaro and published by . This book was released on 2010 with total page 98 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Documents concernant Jetta Goudal vedette de cin ma written by and published by . This book was released on with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on International Trade and Finance written by Amat Borisovich Adarov and published by . This book was released on 2012 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: The dissertation consists of three papers exploring the macroeconomic implications of heterogeneity of countries in financial development, economic interconnectedness via trade and financial linkages. Chapter 1 examines whether countries which are more centrally located in the global trade network have more synchronized stock markets. Global trade data is used to construct a novel measure of random walk betweenness centrality (RWBC), measuring the extent to which a country lies on random pathways in-between other countries and is therefore likely to be a conduit in the transmission of a shock across global markets. Based on a panel dataset of 58 countries over the period 1990--2000, the study finds that higher centrality of a country in the world trade network is indeed associated with greater stock market synchronicity, ceteris paribus. Chapter 2 uses aggregate macroeconomic experiences of 118 countries over the period 1994--2008 to establish benchmark relationships between macroeconomic fundamentals and levels of financial development of the banking sector, equity markets, and private bond markets. The analysis quantifies the extent to which de-facto financial development of emerging market economies (EMEs) deviates from the levels predicted by their macroeconomic stance. While financial markets in Latin American EMEs are found to be well aligned with their macroeconomic fundamentals, Asian EMEs exceed their reference levels, and European EMEs are found to be systematically financially underdeveloped. No support is found for the argument that these misalignments are caused by heterogeneity in institutional development. Finally, chapter 3 studies the properties and evolution of the product space---a network of relatedness between products. We use bilateral trade data for 187 countries to construct the product space and export specialization of individual countries over the period 1965--2000. The study shows that the product space changed significantly during the 20th century and represents a highly uneven core-periphery structure. The highly interconnected core consists of three industries---chemicals, industrial machinery, and crude materials, each forming around 20% of all linkages. Product synergies that these "commanding heights" industries yield are strategically important for industrialization policies. Regression analysis confirms that specialization in these industries is associated with higher real income levels.

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.

Download or read book Essays on International Macroeconomics and Policy written by Tian Xia and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: As the world economy becomes rapidly integrated through the globalization of markets for goods and services, it is crucial to understand how cross-country linkages through goods and financial markets explain observed business cycles in data. Furthermore, interdependent open economies imply that optimal policy is unlikely to be responding to domestic shocks only. This dissertation studies various aspects of open economies from a macroeconomic perspective and discusses related theoretical policy implications. Chapter 1 investigates the implication of intermediate goods on optimal monetary policy in open economies, and in particular, focusing on the welfare gains from monetary cooperation. In a relatively standard two-country dynamic stochastic general equilibrium model with input-output relations, I demonstrate that introducing intermediate goods can amplify the welfare gains caused by cost-push shocks by an order of magnitude larger. A detailed analysis on the equilibrium dynamics highlights a new channel that is absent in the previous literature: non-cooperative central banks respond differently to shocks in the intermediate goods market versus shocks in the final goods market, even if these shocks generate the same distortions when the two central banks cooperate. Furthermore, I find that increasing the degree of openness in the intermediate goods market can reduce the welfare gains from monetary cooperation. This casts doubt on whether the recent trend in international economic integration may justify the potential need for international monetary cooperation. Chapter 2 develops a simple framework for computing equilibrium shares of trade currency invoicing in open economy dynamic stochastic general equilibrium models. The solution method follows closely to Devereux and Sutherland (2011)'s method in solving portfolio choice by applying information from second-order approximations of equilibrium conditions to solving zero-order portfolio shares. The framework is flexible enough to be extended to a Rotemberg sticky price model. To illustrate the approach, I use a simple symmetric two-country model and show that the results are consistent with existing theoretical findings on how monetary policy affects exchange rate pass-through. Chapter 3 investigates the interaction between inequality and financial development in determining the condition for rational asset bubbles to emerge in general equilibrium. I develop a simple overlapping generations model (OLG) with a production economy and financial frictions, which shows that wage inequality can cause dynamic inefficiency in an economy with an underdeveloped financial sector. Furthermore, the model developed in the chapter indicates that trade integration can create asset bubbles through the channel of increasing inequality. The result is consistent with observations where developing countries with export-led growth seem to experience episodes of bubble-like asset price booms and busts in the last three decades.

Download or read book Three Essays in International Finance written by Byong-Ju Lee and published by Stanford University. This book was released on 2011 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three essays on international finance. The first essay is "Exchange rates and Fundamentals". A new open interest rate parity condition that takes account of economic fundamentals is developed from stochastic discount factors (SDFs) of two countries. Through this parity condition, business cycles or fundamentals are linked to exchange rates. Key empirical findings from this parity condition are as follows. First, this model beats the random walk hypothesis: economic fundamentals explain exchange rate movements for high interest rate currencies. Exchange rates of low interest rate currencies act like a random walk because they are less correlated with fundamentals owing to their low risk. For example, U.S. business cycles explain the direction of changes in exchange rates against the dollar. The same thing is true for Japan. Second, this model resolves the forward premium puzzle: the forward premium puzzle is not a general characteristic as regarded in previous studies. It happens when the risk awareness of investors is low, during economic expansions and for low risk currencies. The second essay is "Carry Trade and Global Financial Instability". Carry trade, an opportunistic investment strategy that takes advantage of interest rate differential across countries, is identified the cause of the large-scale depreciations of peripheral currencies in the later half of 2008. A simultaneous equations model, which is derived from a conceptual partial equilibrium model for a local foreign exchange market, is estimated from a cross-sectional sample. The results suggest that the larger appreciation of the yen than the dollar was brought about by a lack of the local supply of the yen rather than a more severe crunch of yen credits. The third essay is "The Economic Origin of Letters of Credit". This essay discusses the economic origin of letters of credit, an instrument widely used in international trade. A game theoretical analysis shows that letters of credit improve efficiency in trade settlements, increasing returns in trade. A few notable facts on letters of credit are discussed. First, the new institution is adopted by merchant banks to maximize their profits and in the process, an improvement in efficiency of international transactions is obtained. Second, the organization established by the legacy institution, bills of exchange, played a critical role in adopting the new institution. Third, the legal enforcement is not essential in this economic institution. Finally, two drivers are identified that improve efficiency of transactions: concentration and projection.

Download or read book Essays on International Asset and Goods Trade written by Meixin Guo and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In contrast with goods market frictions, the role of financial market frictions is not well understood in the international macroeconomics literature. My dissertation research incorporates both financial and goods market frictions in a general equilibrium model, and identifies their significant roles in determining the levels of consumption risk sharing, asset holdings, and goods flows across countries. The first chapter provides evidence on the significance of financial frictions in explaining the lack of international consumption risk sharing in a multi-country framework with heterogeneous country preferences, in addition to goods market frictions. The hierarchical Bayesian method is used to estimate the gravity equations on bilateral imports for a group of 22 OECD countries during 1970-2000. This method can control for the large dimensionality of the parameter space and reduce the size distortion of the likelihood ratio test based on standard panel least squares regressions. The second chapter focuses on how the hierarchical Bayesian method can help resolve the debate on the choice of different dummy variables in the high dimensional gravity equation literature, where estimates of key parameters can vary considerably depending on the ways in which fixed effects may be included. I estimate the Euro Zone effect and European Union effect on import for 22 developed countries during 1980-2004, a case used previously by Baldwin and Taglioni [2006]. The Bayesian results show that the model with time-invariant importer and exporter dummies is preferred. The third chapter, coauthored with Huiran Pan, provides more information about the effect of financial frictions on U.S. imports and foreign equity holdings from 2001 to 2008 for a group of 44 countries, along with traditional trade costs. Using an IV-Tobit model to control for endogeniety problem and many zero values in the data, we find significant negative effects of financial frictions on U.S. equity holdings and imports. The effects are more prominent for sectors with high financial dependence, high asset tangibility, high short-term debt interest repayment constraint, and countries with high interest spreads.

Download or read book Essays on International Economics written by Alvaro Nicolas Boitier and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation, I present three essays on International Economics that investigate the impact of heterogeneity on the transmission of foreign shocks. The dissertation consists of three chapters. In Chapters 1 and 2, I collaborate with Brian Pustilnik to explore how firms' use of supply contracts can influence the propagation of commodity price shocks to aggregate variables. Specifically, I examine purchase obligations, which are contracts that entail fixed prices for the future delivery of goods. In Chapter 1, I rely a novel dataset to highlight two empirical findings. Firstly, I show that firms utilizing these contracts experience a substantial reduction in exposure to commodity price risk, with estimates suggesting adecrease of approximately 27% compared to non-users. Secondly, I observe that sector output and labor compensation exhibit a weaker negative correlation with commodity prices when firms engage in larger contracts. Moving on to Chapter 2, I evaluate the overall quantitative significance of these contracts by introducing and calibrating a tractable general equilibrium model. By constructing a counterfactual scenario where firms are unable to trade these contracts, I assess the contribution of purchase obligations in mitigating the aggregate transmission of commodity price shocks. The results demonstrate that when firms engage in purchase obligations, the relative response of real consumption to a 10% commodity price shock is reduced by approximately 4%. Chapter 3 shifts the focus to consumer heterogeneity and nominal rigidities. Specifically, I investigate the influence of consumer access to financial markets and price stickiness from the firm's perspective. These sources of heterogeneity can significantly alter the propagation of shocks and policy changes. The chapter provides a comprehensive survey of the current literature and explores the effects of policy changes using a stylized model. I examine the impact of nominal depreciation and wealth transfers. The findings reveal that currency depreciation has an expansionary effect, although the lack of access to financial markets may dampen its impact. On the other hand, wealth transfers reduce income inequality but could potentially trigger an economic recession when consumers benefiting from the transfer supply less labor.

Download or read book Three Essays on International Collective Goods written by Harry Gölz and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on International Macroeconomics written by Yi Chen and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation attempts to provide new theoretical explanations of some long-standing international macro-finance puzzles, including the consumption-real exchange rate anomaly (i.e. the Backus-Smith puzzle), the consumption correlation puzzle, the real exchange rate volatility puzzle, the equity home bias puzzle and the exchange rate disconnect puzzle, with a particular emphasis on the possible role(s) played by news shocks and / or recursive preferences à la Epstein and Zin (1989). News shocks, defined in a broad sense as shocks to the market's expectations about future changes in driving forces, can have dramatically different impacts on the model dynamics in contrast to traditional unanticipated shocks to the driving forces. Epstein-Zin preferences, by breaking two independent aspects of preferences (attitude toward risks and willingness to substitute consumptions over time), make consumers more sensitive to long-run risks and as a result amplify the impacts of news shocks. Both features have become increasingly popular in the recent closed-economy macro-finance literature. My dissertation is among the first few to use these features to explain a long list of international macro-finance puzzles. Chapter 1 deals with the consumption-real exchange rate anomaly, the consumption correlation puzzle and the real exchange rate volatility puzzle. Data show that real exchange rates are negatively correlated with cross-country relative consumptions; consumptions are less correlated internationally than outputs; and real exchange rates are much more volatile than consumptions. Chapter 1 argues that these facts don't necessarily point to a "lack of risk sharing across countries" or a "low degree of international goods market integration", as are widely thought to be responsible for the above phenomena. The idea is formalized in a frictionless endowment-driven two-country two-good model featuring long-run news, i.e. slowly-moving signals that change the market's expectations about future output growth, and Epstein-Zin preferences. The model predicts that (1) news has opposite effects on the relative consumption and real exchange rate, so the two can be negatively correlated; (2) news has opposite effects on the home and foreign consumptions, so the cross-country consumption correlation can be low; (3) news makes the inter-temporal marginal rate of substitution (IMRS) excessively volatile relative to consumption growth, so the real exchange rate-consumption volatility ratio can be high. Intuitively, prediction (1) is true because news shocks behave as a demand shifter in the short run. Unlike unanticipated supply shocks, news shocks disturb the relative demand curve and trace out an upward-sloping relative supply curve. Prediction (2) can be justified by the fact that news does not materialize on impact (Christmas hasn't come yet), meaning that responses of consumptions to news are essentially a "zero-sum game" in the short run. Prediction (3) can be understood by noticing that news generates a dynamic wedge between the IMRS and the contemporaneous consumption growth. Calibrated through a structural vector auto-regression (SVAR) exercise, the model quantitatively replicates all the puzzling facts mentioned above. I also investigate the plausibility of two alternative explanations of the puzzles. Neither an incomplete-market model nor a trade-cost model can jointly account for all the facts. Chapter 2 incorporates EZ preferences in an otherwise standard open-macro model and shows that EZ preferences play a role of raising the home bias in equities, i.e. the bias of equity portfolios toward home assets, relative to the standard constant-relative-risk-aversion (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 domestic equity is more likely a good asset as it pays off more whenever investors are willing to spend more. Additional main findings can be summarized as follows. First, using 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 is in contrast to the CRRA models' counterfactual prediction that the degree of equity home bias relies on the conditional covariance-variance ratio between the real exchange rate and the excess equity return. Second, we solve for the optimal portfolio as an explicit function of the structural parameters using Devereux and Sutherland (2011)'s approach. Analytical solutions clearly show that EZ models tilt optimal portfolios toward local equities for a wide range of parameterizations relative to CRRA models. Third, the decomposition of equity home bias into two terms indicates that the relative contribution of the consumption covariance term and the portfolio covariance term to the rise in home bias relies on the persistence of endowment shocks. Chapter 3 looks into the exchange rate disconnect puzzle. Exchange rates seem to be disconnected from macro fundamentals: current and past macro fundamentals have a hard time accounting for the movements in nominal exchange rates (also known as the Meese-Rogoff puzzle); both nominal and real exchange rates appear excessively volatile relative to macro fundamentals; exchange rates don't seem to follow the strong cyclical patterns implied by most standard models. Chapter 3 argues that allowing for news about future money supply in a sticky-price open-economy model can shed light on the disconnect puzzle. News shocks, unlike unanticipated shocks, can affect exchange rates on impact but have muted effects on the contemporaneous macro variables. Two additional assumptions are made to make the mechanism work. First, only a fraction of households have access to the international financial markets while the rest leads a hand-to-mouth life. As news shocks have opposite impacts on the consumptions of two types of households, the aggregate consumption is less responsive. Second, export prices are denominated in local currencies. This assumption helps eliminate the spending-switching effects of nominal exchange rate movements. Overall the model is shown to move things in right directions both qualitatively and quantitatively.

Download or read book Essays on the Great Depression written by Ben S. Bernanke and published by Princeton University Press. This book was released on 2024-01-09 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: From the Nobel Prize–winning economist and former chair of the U.S. Federal Reserve, a landmark book that provides vital lessons for understanding financial crises and their sometimes-catastrophic economic effects As chair of the U.S. Federal Reserve during the Global Financial Crisis, Ben Bernanke helped avert a greater financial disaster than the Great Depression. And he did so by drawing directly on what he had learned from years of studying the causes of the economic catastrophe of the 1930s—work for which he was later awarded the Nobel Prize. Essays on the Great Depression brings together Bernanke’s influential work on the origins and economic lessons of the Depression, and this new edition also includes his Nobel Prize lecture.

Download or read book Three Essays in Labor Economics and Public Finance written by Carolina Rodríguez-Zamora and published by . This book was released on 2009 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays. The first one brings together the areas of public and labor economics by developing a hypothesis that relates optimal taxation and time use. Using Mexican data on household time use and consumption, we find significant substitution between goods and time in home production and different elasticities of substitution for different house-hold commodities. Adding these findings to the optimal tax problem, we show it is optimal to impose higher taxes on market goods used in the production of commodities with a lower elasticity of substitution between goods and time. This is an analog of the classical Corlett and Hague (1953) result, differing in that we allow for the possibility of substitution between goods and time in the production of commodities. The second chapter is about international migration, in the area of labor economics. On one hand, surveillance of the border between Mexico and the United States by the U.S. government has increased dramatically over the last two decades. On the other hand, undocumented Mexican migrants often make multiple trips between the two countries. Thus, my hypothesis is that these migrants respond to heightened surveillance by increasing the length of stay of the current trip. I estimate a semi-parametric hazard model following Meyer (1990). Using data from the Mexican Migration Project I find no evidence that border enforcement affects the hazard of leaving the U.S. by undocumented Mexican Immigrants. The last essay is about mother's time and children related expenditures. Using data from the Mexican Time Use Survey and the National Household Survey of Income and Expenditure from 2002, I examine the time Mexican mothers dedicate to taking care of their children and the amount of money spent by the household in raising children. The main contribution of this paper is that it analyzes child care time use and child care expenditures simultaneously. The age of the youngest child is the most important determinant of both child care time and money expenditures. It is the case that more educated mothers spend more money on their children. With respect to child care time use, more educated mothers spend more or less time with their children depending on whether they are working or non-working mothers. At all levels of non-mother's income, working mothers spend significantly more money relative to time in child care than non-working mothers. For both groups the ratio of money over time increases at a decreasing rate; however, for non-working mothers the income expansion path is much flatter.