Download or read book Three Essays on Real Financial Linkage in Dynamic Stochastic General Equilibrium Models written by Abeer Reza and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Dynamic Stochastic General Equilibrium Models with Heterogeneous Agents and Financial Frictions written by Tianli Zhao and published by . This book was released on 2014 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Macro Finance and Monetary Economics written by Modeste Yirbèhogré Somé and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dynamic Stochastic General Equilibrium Models written by Massimiliano Marzo and published by . This book was released on 2013 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book features tutorials about the role of money and bonds in Dynamic General Equilibrium models. It includes a step-by-step guide to the endogenous derivation of the price kernel employed for the term structure of interest rates and asset pricing.

Download or read book Essays in Macroeconomics and Dynamic Factor Models written by Ziyi Guo and published by . This book was released on 2013 with total page 126 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Two Essays on Maximum Likelihood Estimations of Dynamic Stochastic General Equilibrium Models written by Gulnur Kozak and published by . This book was released on 2008 with total page 155 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two essays on maximum likelihood estimation of Dynamic Stochastic General Equilibrium (DSGE) models. The first essay focuses on a monetary DSGE model of term structure, while the second essay explores and compares three different versions of New Keynesian DSGE models. In Chapter 1, a general background is given for the DSGE models, and their estimation techniques along with a review of the term structure models and New Keynesian models. The first essay, which is a joint work with Hwagyun Kim, empirically evaluates the relationships between money, inflation, output growth, and the interest rates of different maturities using a monetary DSGE model of term structure, featuring inflation targeting behavior, asset market segmentation, and external habit extended for nominal economy. This model can generate liquidity effect, average upward sloping yield curve, and time-varying bond risk premia for bearing inflation and real shocks. By exploiting the term structure equations derived from the model, the deep parameters of the model describing risk preference, inflation targeting behavior, and market segmentation between bond traders and non-traders are estimated. The model is estimated under alternative specifications: latent factors; macroeconomic factors; and both latent and macroeconomic factors. The empirical findings show that all the methods give consistent estimates of the parameters, and conclude that asset market segmentation, inflation targeting, and time-varying risk aversion are significant to account for the term structure dynamics. They also suggest that monetary factors and monetary policy are important to understand both short-run and long-run behaviors of bond prices. In the second essay, three different versions of New Keynesian DSGE models are developed, and their structural parameters are estimated by maximum likelihood estimation. Specifically, the role of velocity of money on the dynamics of real variables is empirically examined by constructing a money in the utility model and two special cases of transactions cost model. Wealth effects, previously ignored in many transactions cost models, are taken into consideration in one of the cases examined here, and comparisons are made between the transactions cost model that includes the wealth effects and the transactions cost model that ignores the wealth effects entirely. The equivalence of money in the utility model and transactions cost model with wealth effects is also quantitatively examined. The results show that there is no evidence of quantitative equivalence between these two models. Although the magnitude of impulse responses are different among the models studied here, all three models give consistent estimates for the structural parameters. The empirical findings from the maximum likelihood estimates of all three models' parameters also suggest that the velocity of money is a very important part of the IS and Phillips curves of all three models developed here, and should be included in IS and Phillips curves when examining the inflation and output dynamics.

Download or read book Essays in the Econometrics of Macroeconomic Models written by Andreas Tryphonides and published by . This book was released on 2016 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt: The thesis has focused on issues related to the use of external information in the identification, estimation and evaluation of Dynamic Stochastic General Equilibrium (DSGE) models, and comprises three papers. The first paper, entitled Improving Inference for Dynamic Economies with Frictions - The role of Qualitative Survey data, proposes a new inferential methodology that is robust to misspecification of the mechanism generating frictions in a dynamic stochastic economy. I derive a characterization of the model economy that provides identifying restrictions on the solution of the model that are consistent with a variety of mechanisms. I show how qualitative survey data can be linked to the expectations of agents and how this link generates an additional informative set of identifying restrictions. Moreover, I show how the framework can be used to formally validate mechanisms that generate frictions. Finally, I apply the methodology to estimate the distortions in the Spanish economy due to financial frictions and derive an optimal robust Taylor rule. The second chapter, entitled Estimation and Inference for Incomplete Structural Models using Auxiliary Density Information considers an alternative method for estimating the parameters of an equilibrium model which does not require the equilibrium decision rules and produces an estimated probability model for the observables. This is done by introducing auxiliary information about the conditional density of the observables, and using density projections. I develop and assess frequentist inference in this framework. I provide the asymptotic theory for parameter estimates for a general set of conditional projection densities and simulation exercises. In the third chapter, entitled Monetary Policy Rules and External Information, I analyze how conclusions about monetary policy stance are altered when we explicitly acknowledge that model concepts like the output gap and inflation are non-observable and we utilize many proxies that are available in the data. I document the effects on Bayesian inference of introducing such proxy information.

Download or read book Three Essays on Monetary Policy in Economies with Financial Frictions written by Rahul Anand and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this dissertation is to understand the role of financial frictions in the transmission of shocks and their effect on the monetary policy transmission mechanism. To accomplish the task, we develop Dynamic Stochastic General equilibrium models with financial frictions. In the first chapter, we develop a model to analytically determine the appropriate price index to target in the presence of financial frictions (where a fraction of households are constrained to consume their wage income each period). The analysis suggests that in the presence of financial frictions, a welfare-maximizing central bank should adopt flexible headline inflation targeting-i.e. a headline inflation target but with some weight on the output gap. These results are particularly relevant for emerging markets, where the share of food expenditures in total consumption expenditures is high and a large proportion of consumers are credit constrained. In the second chapter, we develop a small open economy model with macrofinancial linkages. The model includes a financial accelerator - entrepreneurs are assumed to partially finance investment using domestic and foreign currency debt - to assess the importance of financial frictions in the amplification and propagation of the effects of transitory shocks to productivity, interest rates and net worth of firms. We use Bayesian estimation techniques to estimate the model using India data. The model is used to assess the importance of the financial accelerator in India and to assess the optimality of the current monetary policy rule. In the third chapter, we develop a small open economy New Keynesian model with financial frictions and an active banking sector for India. We find that the presence of a monopolistic banking sector with sticky interest rate setting attenuates the shocks. However, if the interest rates are flexible it results in the amplification of shocks. We also find that an unexpected reduction in bank capital can have a substantial impact on the real economy and particularly on investment. Use of nonmonetary policy tools result in greater volatility as compared to when central banks use traditional monetary tightening.

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 on Macroeconomics and Banking written by Lulei Song and published by . This book was released on 2018 with total page 145 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation covers three loosely connected topics in Macroeconomics and Banking. The first chapter, titled Effect of Failed Bank Mergers During the Crisis on Cost Efficiency, examines the effect of merging with failed banks during the crisis period on the acquiring banks' cost X-efficiency. Between December 31, 2006, and Decem- ber 31, 2010, the number of U.S. commercial banks and savings institutions declined significantly because of failures. The majority of failed banks were acquired by the existing banks. I utilize the Fourier flexible cost function form to estimate the cost X-efficiency, and find out that merging with failed banks does negatively affect the cost X-efficiency of the acquiring bank. Although the local market concentration does not change much after the merger, the decrease in cost X-efficiency may still indicate the increase of market power for acquiring banks. With the evolving technology, the cost of obtaining banking service from distant providers fell a lot compared with 30 or 40 years ago. Local market concentration may no longer be a good measure of market competitiveness, and the FDIC may need to develop other more relevant measures regarding merger regulations. The second chapter, titled Financial Regulation and Stability of the Banking System, builds a dynamic stochastic general equilibrium model which includes both regulated and unregulated banks to study the effect of the capital requirement, which is imposed only on regulated banks, on the stability of the financial system. One of the most distinctive features of the recent financial crisis is the turmoil of the financial market. Financial institutions with high leverage were the first to bear the brunt, and the chain effect caused by their bankruptcy led the economy into a prolonged depression. In order to stabilize the financial market and prevent financial institutions from taking excessive risks, the government imposed capital requirements on the regulated banks. However, a large number of financial institutions, which perform similar functions as regulated banks, are not under government regulation. In this paper, I build a model which includes both regulated banks, referred to as commercial banks, and unregulated banks, referred to as shadow banks, to study and quantify the effects of capital requirements on the stability of the financial system. I find that when the capital requirement is high enough to help commercial banks to survive the bank runs, it does help to alleviate the negative impact of the crisis. However, if the capital requirement is not high enough, increasing capital requirements only causes decreased net output but does not help to stabilize consumption and capital price during the crisis. The third chapter is titled The Effect of Monetary Policy on Asset Price Volatility: Evidence from Time-Varying Parameter Vector Autoregression Approach. The great financial recession in 2007 - 2009 reactivated the discussion of the effect and the focus of monetary policies. Some researchers argue that whether the monetary authority should take action to fight against the asset price bubbles prior to 2007 aside from targeting inflation and GDP gap. However, one important fact that often get ne- glected is that the volatility of the financial market is also closely related to monetary policy shocks, and it has an important impact on economic output and unemployment in the economy. This paper utilizes two empirical methods, constant parameter structural vector auto-regression and time-varying parameter vector auto-regression, to study the relationship between monetary policy and financial market volatility. I find that under these two different methods, the financial market volatility responds differently to the monetary policy shocks.

Download or read book Essays on Financial Crises written by Kayhan Koleyni and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The global financial crisis made clear that the financial sector and financial frictions play an integral role in the macroeconomy. Modelers are quickly incorporating these in different ways. This dissertation research also investigates both the causes and effects of financial crises. The first essay, which is mostly empirical, analyzes the impact of the recent U.S. financial crisis on Mexico while the second one, which is theoretical, introduces the Minsky financial friction into the literature as one of the causes of banking and financial crises. In the first essay, we simulate the impact of the U.S. financial crisis on Mexico, a major trading partner with close financial linkages, with the Gali and Monacelli (2005) small open economy DSGE model under two exchange rate regimes: the actual floating and the counterfactual fixed exchange rate regime. We assume the financial crisis generates a supply side shock (a productivity shock) and a demand side shock (a preference shock), which are the driving forces of the model. The results indicate that for both the demand and supply side shocks, the floating exchange rate ameliorates much of the impact on the Mexican economy vis- & agrave;-vis the counterfactual fixed exchange rate regime. Then I consider interest rate adjustments initiated in response by both the U.S. and Mexican monetary authorities. For the fixed exchange rate regime the impulse responses due to the productivity shock on most of Mexico & rsquo;s macroeconomic variables dissipate in less than thirteen quarters, with inflationary effects on price variables and permanent effects on the CPI and Mexico & rsquo;s home goods prices. Under the flexible exchange rate regime the effects of this shock are much smaller, and there is a deflationary effect and negative permanent effects on the nominal exchange rate, the CPI and Mexico & rsquo;s home goods prices. The variance decompositions indicate that the effects on real variables are larger under the fixed exchange rate regime and the external linkages are tighter. Welfare analysis shows that losses under the float are also less vis-a-vis the fixed and two other alternative central bank policy rules. The second essay introduces a new mechanism for financial frictions in a monetary dynamic stochastic general equilibrium model following Minsky & rsquo;s financial instability hypothesis (1977). We expand the Christiano, Trabandt and Walentin (2011) model by introducing three different types of entrepreneurs or borrowers: hedge, speculative and Ponzi borrowers. We change the role of banks from a non-risk taking financial intermediary in the CTW (2011) model to a risky debt accumulator. Then we link the accumulation of debt to the endogenous state of nature, which is absent in the current DSGE literature. The state of nature is endogenously a function of past history and the relative state of the business cycle. So ultimately the bank & rsquo;s profit function is a function of business cycle fluctuations. We also introduce a new type of shock, which we call the & ldquo;Minsky system risk & rdquo; shock. This shock captures excessive system risk that occurs within a banking network due to intermediation and interconnection among banks. Then we calculate the likelihood of a Minsky moment (or financial crisis) endogenously based on the bank & rsquo;s profit maximization problem.

Download or read book Dynamic Stochastic General Equilibrium Models with Money Default and Collateral written by Kwangwon Ahn and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dynamic Stochastic General Equilibrium Modelling written by Bo Yang and published by LAP Lambert Academic Publishing. This book was released on 2011-09-01 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent episodes of financial turmoil have highlighted the need to understand how large external shocks are propagated in small open economies. This is particularly relevant in emerging economies, since these economies face additional vulnerabilities that make them very different from advanced economies. Indeed, they usually display weak fiscal, monetary and financial institutional frameworks, and have imperfect access to capital markets. This book studies Dynamic Stochastic General Equilibrium modelling and empirical applications to developed/developing economies. It consists of four self-contained chapters. Chapter 1 sets out a benchmark model with persistence mechanisms and reviews the underlying estimation/validation methods. Chapter 2 studies the relevance of direct supply side effects of monetary policy by introducing the presence of a cost channel of monetary transmission and allowing for non-separability of money and consumption in the household's utility. Chapters 3 and 4 model dollarization, as well as financial frictions including a 'financial accelerator', where capital financing is partly or totally in foreign currency as in Gertler et al. (2003) and Gilchrist (2003).

Download or read book Macroeconomic Imbalances Crises and Management of Crises in Euro Area Countries written by A. Frédia Monsia and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Macroeconometrics written by Gergely Ákos Gánics and published by . This book was released on 2017 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three chapters on topics in macroeconometrics. Chapter 1 provides a novel estimator of combination weights which delivers well-calibrated density forecasts. In an empirical example of forecasting US industrial production, I show that my proposed methodology outperforms several benchmark combination schemes, and the weights indicate that financial variables proved to be useful predictors during the Great Recession. Chapter 2 investigates time-variation in the forecasting performance of structural Dynamic Stochastic General Equilibrium models and reduced-form statistical models. I show that the models' in-sample forecasting ability was strongly related to their out-of-sample performance before the recent financial crisis, but this link considerably weakened at the onset of the crisis. In Chapter 3 we propose a methodology to construct confidence intervals for the strength of identification in both instrumental variable models and Structural Vector Autoregressive models identified with an external instrument. We illustrate the proposed method using three leading empirical examples: the New Keynesian Phillips Curve, a linearized Euler equation, and a Structural Vector Autoregressive model describing the dynamic effects of oil shocks.

Download or read book Post Walrasian Macroeconomics written by David Colander and published by Cambridge University Press. This book was released on 2006-07-17 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Macroeconomics is evolving in an almost dialectic fashion. The latest evolution is the development of a new synthesis that combines insights of new classical, new Keynesian and real business cycle traditions into a dynamic, stochastic general equilibrium (DSGE) model that serves as a foundation for thinking about macro policy. That new synthesis has opened up the door to a new antithesis, which is being driven by advances in computing power and analytic techniques. This new synthesis is coalescing around developments in complexity theory, automated general to specific econometric modeling, agent-based models, and non-linear and statistical dynamical models. This book thus provides the reader with an introduction to what might be called a Post Walrasian research program that is developing as the antithesis of the Walrasian DSGE synthesis.