Essays on Capital Market Frictions
Author | : Vasantharao Chigurupati |
Publisher | : |
Total Pages | : 0 |
Release | : 2012 |
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ISBN | : |
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Author | : Vasantharao Chigurupati |
Publisher | : |
Total Pages | : 0 |
Release | : 2012 |
Genre | : |
ISBN | : |
Author | : Mario Ronald Christian Bersem |
Publisher | : |
Total Pages | : 0 |
Release | : 2012 |
Genre | : |
ISBN | : 9789036103077 |
"This dissertation investigates capital market frictions across three themes. The first theme is sovereign debt. Recent experience in the EU shows that it can be complex to enforce the repayment promises of states. Furthermore, governments are better informed about their repayment capacity than creditors are. This dissertation argues that enforcement and information problems explain why states issue simple debt contracts that frequently lead to debt crises. Such contracts are optimal because they save on costly audits by creditors. The second theme concerns collective pension funds. It is often argued that pension funds can enhance the welfare of their participants. This dissertation highlights one rationale for pension funds based on credit constraints. Pension funds' actual ability to increase welfare may be limited due to an agency problem. The third theme concerns political intervention in capital markets. Financial liberalization and expanded access to capital are historically seen as signs of greater freedom. Yet many democratic states choose to restrain the resource allocation called for by free capital markets. This dissertation argues that democracies may choose to introduce restraints on free capital markets-thereby favouring income stability over economic growth-depending on demographical context, the distribution of wealth, and the rate of technological progress."--Achterplat.
Author | : |
Publisher | : |
Total Pages | : 131 |
Release | : 2012 |
Genre | : |
ISBN | : 9789036103077 |
"This dissertation investigates capital market frictions across three themes. The first theme is sovereign debt. Recent experience in the EU shows that it can be complex to enforce the repayment promises of states. Furthermore, governments are better informed about their repayment capacity than creditors are. This dissertation argues that enforcement and information problems explain why states issue simple debt contracts that frequently lead to debt crises. Such contracts are optimal because they save on costly audits by creditors. The second theme concerns collective pension funds. It is often argued that pension funds can enhance the welfare of their participants. This dissertation highlights one rationale for pension funds based on credit constraints. Pension funds' actual ability to increase welfare may be limited due to an agency problem. The third theme concerns political intervention in capital markets. Financial liberalization and expanded access to capital are historically seen as signs of greater freedom. Yet many democratic states choose to restrain the resource allocation called for by free capital markets. This dissertation argues that democracies may choose to introduce restraints on free capital markets-thereby favouring income stability over economic growth-depending on demographical context, the distribution of wealth, and the rate of technological progress."--Achterplat.
Author | : Katherine A. Smith |
Publisher | : |
Total Pages | : 97 |
Release | : 2003 |
Genre | : Capital movements |
ISBN | : |
Author | : Phillip Martin Johnson |
Publisher | : |
Total Pages | : 152 |
Release | : 1997 |
Genre | : Capital market |
ISBN | : |
Author | : 孫軼博 |
Publisher | : |
Total Pages | : 0 |
Release | : 2023 |
Genre | : Capital market |
ISBN | : |
Author | : Seungho Nah |
Publisher | : |
Total Pages | : 129 |
Release | : 2010 |
Genre | : |
ISBN | : |
Abstract: In the first essay, 'Financial Frictions, Intersectoral Adjustment Costs, and News-Driven Business Cycles', I show that an RBC model with financial frictions and intersectoral adjustment costs can generate sizable boom-bust cycles and plausible responses of stock prices in response to a news shock. Booms in the labor market, which make it possible for both consumption and investment to increase in response to positive news, are caused through two channels: the increases in value of marginal product of labor and the increases in value of collateral. Both of these channels enable firms to hire more workers. Intersectoral adjustment costs contribute to both channels by increasing the relative price of output and capital during expansions. Financial frictions enter in the forms of collateral constraints on firms, which influence the latter channel, and the financial accelerator mechanism driven by agency costs, which amplifies all the key variables. My model differs from previous studies in its ability to generate boom-bust cycles without restricting the functional form of consumption in household preferences and without requiring investment adjustment costs, variable capital utilization, or any nominal rigidities. In the second essay, 'Financial and Real Frictions as Sources of Business Fluctuations', I show that a negative shock to a financial or real friction in an economy can generate quantitatively significant and persistent recessions, even without a decrease in exogenous aggregate total factor productivity in a heterogeneous agents DSGE model. The increase in uncertainty that a firm is facing when it makes capital adjustment, however, is found to have a limited or dubious influence on economic activities. The roles of collateral constaints as a financial friction and nonconvex capital adjustment costs as a real friction in aggregate fluctuations are examined in this propagation mechanism. When these frictions become strengthened, the degree of capital misallocation is intensified, which leads to a drop of endogenous aggregate total factor productivity. As agents expect that the return to investment and endogenous TFP decrease, they reduce aggregate investment sharply, which also leads to a drop in employment. Interruption of efficient resource allocation coming from these two frictions is found out to be enough to generate a large and persistent aggregate flucutations even without introducing heterogeneity in firm-level productivity.
Author | : Andrada Bilan |
Publisher | : |
Total Pages | : |
Release | : 2020 |
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ISBN | : |
Author | : Nicolas Petrovsky-Nadeau |
Publisher | : |
Total Pages | : |
Release | : 2009 |
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ISBN | : |
The first chapter shows that the propagation properties of the standard search and matching model of equilibrium unemployment are significantly altered when vacancy costs require some external financing on frictional credit markets. Agency problems on credit markets lead to higher costs of vacancies. When the former are counter-cyclical, this greatly increases the elasticity of vacancies to productivity through two distinct channels: (i) a cost channel - lowered unit costs during an upturn as credit constraints are relaxed increase the incentive to post vacancies; (ii) a wage channel - the improved bargaining position of firms afforded by the lowered cost of vacancies limits of the upward pressure of market tightness on wages. As a result, the model can match the observed volatility of unemployment, vacancies and labor market tightness. Moreover, the progressive easing of financing constraints to innovations generates persistence in the response of market tightness and vacancies, a robust feature of the data and shortcoming of the standard model. Extending the model to allow for endogenous job separation improves its ability to match gross labor flows statistics while preserving its propagation properties. The second chapter documents the existence of time-varying congestion in the (re)allocation of physical capital akin to what is observed on labor markets. It then builds a model with search frictions for the allocation of physical capital in order to investigate its implications for the business cycle. While the model is in principle capable of generating substantial internal propagation to small exogenous shocks, the quantitative effects are modest once it is calibrated to fit firm-level capital flows. The model is then extended to credit market frictions that lead to countercyclical default as in the data. Although countercyclical default directly affects capital reallocation, even in this extended model, search frictions in physical capital markets play only a small role for business cycle fluctuations. The final chapter models flows of foreign direct investment (FDI) in a two country, two sector DSGE framework. The allocation of capital to production capacity abroad is subject to a search-and-matching friction with endogenous capital reallocation, capturing the additional cost and time involved in adjusting production capacity abroad. The model is calibrated on observed gross inflows and outflows of FDI and leads to dynamics of net foreign direct investment consistent with the empirical evidence documented in this chapter: inward and outward net flows of FDI are positively correlated whereas a standard International Real Business Cycle model has the prediction of a negative correlation. Moreover, the model solves the aggregate investment quantity puzzle as it generates cross-country correlations in-line with the data.
Author | : Elisabeth Maria Huybens |
Publisher | : |
Total Pages | : 344 |
Release | : 1995 |
Genre | : |
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