Download or read book Three Essays on Macro finance Banking and Monetary Policy written by Russell H. Rollow and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In my first chapter, I study how the dollar funding fragility of non-US banks amplifies cyclical patterns in their appetite for credit risk. Global banks outside of the United States finance a significant portion of their dollar-denominated lending with uninsured wholesale dollar funding, the price of which rises with the perceived riskiness of the bank. Using data from the syndicated lending market, I examine the risk appetite of non-US global banks when a broad appreciation of the US dollar expands portfolio tail risk and activates value-at-risk constraints. By orthogonalizing errors in professional forecasts of the broad dollar index to other macroeconomic indicators, I show that following such a dollar appreciation, global banks with a heavy dependence on wholesale dollar funding contract cross-border dollar lending to firms with high credit risk, as measured with loan-specific spreads and borrower-specific characteristics. Based on this evidence, I argue that instability in non-US bank funding structures amplifies cyclical patterns in their appetite for credit risk.In my second chapter, I explore how traditional modeling techniques can be applied to produce density forecasts of interest rates. As spikes in economic uncertainty have grown in prevalence, the projection of financial data has become a more arduous task, which has sharpened the focus of investors and policymakers on forecast risk. By integrating a dynamic factor model into a Bayesian framework, I develop a density forecasting model that projects the predictive density of interest rates. Unlike point forecasts, density forecasts produce probability estimates for the full distribution of potential future outcomes of interest rates, as opposed to solely their central tendency. To assess the viability of my forecasting model, I conduct a robust out-of-sample evaluation of the model's performance, finding the model significantly outperforms a competing benchmark autoregressive model, especially when economic uncertainty is high. By examining density forecasts of Treasury yields during the COVID-19 pandemic and the term spread prior to the financial crisis of 2008, I demonstrate the value of the dynamic factor model in expanding the information set available to forward-looking investors and policymakers.In my third chapter, I analyze the impact of the Federal Reserve's adoption of a floor system of monetary policy implementation on the transmission mechanism of changes in the policy rate to US bank balance sheets. Since 2008, in part due to easy monetary policy, United States interest rates have remained at historically low levels. Using US commercial bank call report data, I examine the response of bank profitability and investment to a rise in the rate of interest on reserve balances (IORB). Specifically analyzing the 2015-18 Federal Reserve monetary tightening cycle, I show that, following a rise in the IORB, holding more reserves buffers bank NII growth and asset growth against the adverse effects of a rise in the IORB. Taken together, these results imply that a rise in the policy rate raise profitability for banks with substantial reserve holdings and, when capital constraints bind, expand investment capacity.

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 Three Essays in Macro Finance written by Xing Guo and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Macro finance Relationships written by Azamat Abdymomunov and published by . This book was released on 2010 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: In my dissertation, I study relationships between macroeconomics and financial markets. In particular, I empirically investigate the links between key macroeconomic indicators, such as output, inflation, and the business cycle, and the pricing of financial assets. The dissertation comprises three essays. The first essay investigates how the entire term structure of interest rates is influenced by regime-shifts in monetary policy. To do so, we develop and estimate an arbitrage-free dynamic term-structure model which accounts for regime shifts in monetary policy, volatility, and the price of risk. Our results for U.S. data from 1985-2008 indicate that (i) the Fed's reaction to inflation has changed over time, switching between "more active" and "less active" monetary policy regimes, (ii) the yield curve in the "more active" regime was considerably more volatile than in the "less active" regime, and (iii) on average, the slope of the yield curve in the "more active" regime was steeper than in the "less active" regime. The steeper yield curve in the "more active" regime reflects higher term premia that result from the risk associated with a more volatile future short-term rate given a more sensitive response to inflation. The second essay examines the predictive power of the entire yield curve for aggregate output. Many studies find that yields for government bonds predict real economic activity. Most of these studies use the yield spread, defined as the difference between two yields of specific maturities, to predict output. In this paper, I propose a different approach that makes use of information contained in the entire term structure of U.S. Treasury yields to predict U.S. real GDP growth. My proposed dynamic yield curve model produces better out-of-sample forecasts of real GDP than those produced by the traditional yield spread model. The main source of this improvement is in the dynamic approach to constructing forecasts versus the direct forecasting approach used in the traditional yield spread model. Although the predictive power of yield curve for output is concentrated in the yield spread, there is also a gain from using information in the curvature factor for the real GDP growth prediction. The third essay investigates time variation in CAPM betas for book-to-market and momentum portfolios across stock market volatility regimes. For our analysis, we jointly model market and portfolio returns using a two-state Markov-switching process, with beta and the market risk premium allowed to vary between "low" and "high" volatility regimes. Our empirical findings suggest strong time variation in betas across volatility regimes in most of the cases for which the unconditional CAPM can be rejected. Although the regime-switching conditional CAPM can still be rejected in many cases, the time-varying betas help explain portfolio returns much better than the unconditional CAPM, especially when market volatility is high.

Download or read book Three Essays in Macro finance written by Annukka Ristiniemi and published by . This book was released on 2016 with total page 153 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays that examine the role of sovereign debt in the economy. The first of the essays explores the question of optimal debt through liquidity and finds that as long as debt is below a sustainability threshold, increasing debt is beneficial. Increasing debt levels encourages buyers to enter the market improving liquidity and lowering yields. The result is built by combining two strands of literature, market thinness and default probabilities in a unified search-theoretic model of over the counter traded debt. The model also predicts that liquidity and yields in smaller countries that are not able to issue much debt, suffer more from shocks to income. A panel VAR with data on Eurozone countries confirms this prediction. In the second chapter I present a search theoretic model of over-the-counter debt with quantitative easing that explains why interest rates fall more in some countries than others. The study is motivated by our finding that the higher rated a Eurozone country was, the more yields fell. Since the central banks purchase similar amounts in each Eurozone country, it cannot explain the difference in impact on yields. We explain the differential through two channels. Firstly, in markets for highly rated bonds, there are more preferred habitat investors and subsequently fewer sellers. Sellers therefore have a higher bargaining power and can negotiate a higher price. Those preferred habitat investors' have a less elastic demand for bonds, and wil continue to buy them even though it becomes harder to find sellers and their bargaining power diminishes. This excess demand due to market tightness has an additional positive impact on the price. Finally, central bank purchases initially improve liquidity, especially in high risk countries where the measure of buyers is small, but as it tapers the purchases, liquidity is reduced well below pre-purchase levels especially in those countries, that is the cost of quantitative easing. We estimate the share of preferred habitat investors in each Eurozone country from the ECB's Securities and Holdings Statistics and confirm the differential impact on yields with a panel VAR and an event study. The third chapter examines credit ratings and their impact on sovereign debt crises and yields. The results show that credit ratings are poor predictors of sovereign debt crises. A parsimonious model of fundamentals is better at predicting Emerging Market debt crises than credit ratings. Furthermore, rating changes tend to lag events significantly. Investors should therefore ignore rating changes given that they do not contain new information. Estimating the impact of rating changes on yields, we find evidence of contrary, yields react especially strongly to downgrades of non-investment grade debt. This can be due to regulatory constraints where a downgrade reduces the value of debt as a collateral.

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 Three Essays in Macroeconomics and Finance written by Stefan Pitschner and published by . This book was released on 2016 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three chapters on topics in macroeconomics and finance. In the first chapter, I use texts from corporate filings of US companies to investigate if liquidity shortages that occurred during the late-2000 financial crisis were different from cases that occur during more normal times. In the second chapter, I quantify narrative evidence from corporate filings to construct a novel dataset on the price-setting behavior of companies. I then use this dataset to investigate what factors cause firms to change the prices of their products or prevent them from doing so. In the third chapter, I use a number of high-frequency financial market estimates to identify the monetary policy shock in a non-recursive Factor Augmented Vector Autoregression of monthly frequency.

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

Download or read book Three Essays in Macro finance and International Finance written by Siwen Zhou 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 PhD series written by Jesper Pedersen and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Financial Markets and the Macroeconomy written by Shingo Goto and published by . This book was released on 2001 with total page 506 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Macro Finance and Monetary Policy written by Jesper Pedersen and published by . This book was released on 2009 with total page 186 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays in Macroeconomics and Finance written by David Henry Bowman and published by . This book was released on 1993 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Macro finance written by Nicolas Aragon and published by . This book was released on 2017 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis deals with the economics of crises, within the macro-finance literature. The first chapter, coauthored with Rasmus Pank, deals with how crises emerge. Particularly, we are interested in how confidence affects the outcomes in an experimental asset market where the fundamental value is known by all the participants. We elicit expectations in a way that allows us to measure con-fidence. We ask participants to forecast the one-period-ahead price as a discrete probability mass distribution and find that confidence not only affects the price-formation in markets, but also is important in explaining the dynamics of the bubble. Moreover, as traders' confidence grows, they become increasingly more optimistic, thus increasing the likelihood of price bubbles. The remaining chapters deal with policy responses to crises. The second chapter, "Banks vs Zombies", studies how zombie firms arise in equilibrium and the scope for policy. Zombie firms are otherwise insolvent borrowers who are kept a oat by new credit from banks to cover their losses. The practice, known as evergreening or zombie lending, has occurred in times of financial distress even when debt restructuring is allowed. I study the incentives to restructure debt in a borrower-lender game and provide conditions under which it is optimal to engage in evergreening even when socially inefficient. In normal times, the borrower can access a competitive credit market and pay the opportunity cost of capital. When a shock renders the creditor insolvent, debt needs to be restructured. The firm is locked in a lending relationship and the incumbent bank has monopoly power. Normally, a lender would liquidate the firm. However, the lender is also financially distressed, the incentives to restructure change radically. To keep the firm afl oat and prevent its own bankruptcy, the bank covers the firms losses. It does not, however, fund investment, as the distressed borrower may not use the funds effciently. Evergreening can happen for profitable investments and renegotiation does not solve the problem. I discuss policy alternatives and show that debt haircuts and bank capitalizations must be used simultaneously; and that monetary policy can behave differently in the presence of zombie firms. Finally, I provide evidence supporting the model using a novel panel data set of matched firms and banks for the case of Spain. The final chapter, "Optimal Haircuts", analyzes the desirability of intervention in a simple model of heterogeneous firms and households. Households finance firm's working capital, and the credit constrained firms are heterogeneous in their productivity and hence debt levels. After an unexpected aggregate shock, less productive firms go bankrupt. This directly decreases the wage income of the households, and indirectly decreases their income from the defaulted loans to firms. The main result of the paper is that there is an optimal haircut for deposits such that both firms and families are better off. Moreover, there is a tension between maximizing welfare and maximizing output. This provides a rationale for the Cypriot, Hungarian and Argentinean experience. The model is adapted to an open economy and used to analyze a devaluation shock, which provides policy for countries attempting to escape a monetary union or a currency peg.

Download or read book Essays on Macro finance written by Vadim Aevskiy 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 self-contained essays that deal with different aspects of macroeconomics and finance. The common object for study all of the three is the interest rate in the context of European economies both developed (the Eurozone) and emerging (Russia). The EU and Russia are important parts of the World economy and closely interrelated to each other. Therefore, from the point of view of academicians and policymakers it is important to study the main macroeconomic driving factors of such economies from the Global perspective. The first essay is devoted to constructing a term structure of interest rates model in the case of a country entering into currency area. The second essay also deals with interest rates, but in the context of monetary policy, namely it finds the Taylor rule specification that fits best Russia's data. The third essay considers Russia's economic policies in a broader context, specifically a calibrated DSGE model is developed to evaluate the role of the banking sector in shock transmission in an oil-exporting economy like Russia.

Download or read book Three Essays on the Macroeconomic Effects of Financial Structure written by William Osterberg and published by . This book was released on 1986 with total page 426 pages. Available in PDF, EPUB and Kindle. Book excerpt: