Essays in financial and monetary economics
This thesis consists of three essays in Financial and Monetary Economics. In the first essay, I consider a two-period general equilibrium model with uncertainty and real assets as financial instruments. The novelty of the analysis is that real assets are the stocks of neoclassical firms, so that both returns and yields depend on anticipated spot goods prices (and, of course, the yield matrix may change rank with prices). Assuming that financial markets are potentially complete, I establish generic existence of financial equilibrium and prove that there exists a dense set of economies such that financial equilibria are efficient. In the second essay, I generalize the standard search-theoretic model of monetary exchange by allowing both divisible goods and general utility functions, and by introducing heterogeneity across agents in terms of their production costs. I analyze how such factors as the supply of money, trading frictions and differences in productivity of agents influence the state of the economy. I show that there exists a cut-off type such that all types with marginal productivity lower than the cut-off do not produce or trade for money. In the third essay, I consider a risk-neutral, price-taking and value-maximizing firm under demand uncertainty. The firm chooses optimal investment strategies; the investment is irreversible. For a wide family of non-Gaussian processes, I derive an explicit formula for the boundary of the inaction region by using the Wiener-Hopf factorization method. As an application of the method, I suggest a Marshallian-like form for the investment rule. It is applicable when the price can move in both directions, and uses the infimum process of the price instead of the price process itself. I also write down an analytic formula for the expected level of the capital stock in terms of the infimum and supremum processes. Both results are new even for the Gaussian case.
|Year of publication:||
|Authors:||Boyarchenko, Svetlana I|
|Type of publication:||Other|
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