Essays on liquidity in macroeconomics

This thesis includes four essays on the macroeconomic effects of financial market imperfections. The first essay studies the incentives for banks that participate in an interbank market to keep a sufficient level of reserves. It presents a model where, in presence of imperfect insurance against bank-specific shocks, banks keep an inefficiently low ratio of reserves to deposits. A consequence of this is that the interest rate on the money market will fluctuate too much from a second-best perspective. It discusses the potential benefits and risks associated to central bank intervention, and highlights the complementarity between regulatory reserve requirements and stabilization of the interest rate. The second essay (joint with C. Hellwig) studies the ability of banks to issue liquid liabilities while holding only a fraction of their activities in liquid assets. We study the possibility of self-sustaining equilibria in which banks are prevented from abusing their issuing privilege by the threat of losing it in case of default. The third essay is a contribution to the empirics of precautionary savings and shows evidence of a decreasing relationship between household wealth and the variability of consumption expenditure. The evidence is consistent with the presence of a precautionary motive for wealth accumulation. The fourth essay (joint with F. Broner) shows that the time series of the spreads on emerging market bonds appears consistent with the view that international investors supplying funds to these countries are liquidity constrained at times of large price drops.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Economics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2001

Author dc:creator

• Lorenzoni, Guido

Advisor dc:contributor.advisor

• Ricardo Caballero.

• Economics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/8650

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/8650