Publication: Essays on heterogeneous agent models
Loading...
Identifiers
Publication date
2015-05
Defense date
2015-07-16
Authors
Advisors
Tutors
Journal Title
Journal ISSN
Volume Title
Publisher
Impact
Export
Abstract
There is a continued interest among economists on the interconnections between financial
markets, credit markets and the real economy. The three main chapters of this dissertation
contribute to the understanding of how financial and credit frictions - either at the fi rm
or household level - can aff ect the real economy, and even trigger a financial crisis.
Chapter 1 studies the causes of fi nancial crises. I show that shocks to the volatility of
total factor productivity (TFP) can generate endogenous variations in loan-to-value (LTV)
ratios and trigger credit crunches, without appealing to fi nancial shocks. Using a panel
of countries, I find that nancial crises coincide with the reversal of a long period of low
volatility of TFP. To explain this new fact, I develop a general equilibrium model in which
volatility shocks to TFP interact with an occasionally binding borrowing constraint and
housing serves as collateral. I introduce search frictions in the housing market to capture
the liquidity of housing and endogenize the LTV ratio: households borrow at higher LTV
ratios when the collateral is more liquid. In this environment, volatility shocks cause
financial crises by changing the liquidity of the collateral. In a quantitative exercise, I
feed the model with the stochastic volatility of the U.S. Solow residual. I fi nd that the
interaction of volatility shocks and search frictions in the housing market increases the
frequency of fi nancial crises by 47% and the associated output drop by 30%. In addition,
volatility shocks generate volatile LTV ratios, thus providing a foundation for fi nancial
shocks.
Chapter 2 studies whether households’ limited attention to the stock market can quantitatively
account for the bulk of asset prices. I address this question introducing an observation
cost in a production economy with heterogeneous agents, incomplete markets
and idiosyncratic risk. In this environment inattention changes endogenously over time
and across agents. I calibrate the observation cost to match the observed duration of
inattention of the median agent in the data. The model generates limited participation
in the stock market, a weak correlation between consumption growth and stock returns,
and countercyclical dynamics for both the stock returns volatility and the excess return. It
also generates forms of predictability in stock returns and consumption growth. Nonetheless,
the level of the equity premium is still low, around 1%. Finally, I fi nd that inattention
a ects asset prices if borrowing constraints are tight enough.
Chapter 3 - which is joint work with Alessandro Peri - studies the series of US annual
corporate default rates from 1950 until 2012. We document the presence of one structural
break in the unconditional mean, which is dated in 1986. Meanwhile credit spreads hardly
moved. We present a dynamic equilibrium model where the development of credit markets
accounts for this empirical evidence. Financial development increases both the default rate
and fi rms’ expected recovery rates. These two e ffects off set each other and translate into
constant credit spreads. In the model nancial development explains 64% of the rise in default rates and predicts just a 2 basis point increase in the credit spreads. Furthermore,
the model accounts for a number of trends that characterized public fi rms over the last
decades: the fall in the number of firms distributing dividends, the rise in the degree of
dividend smoothing, and the increase in the volatility of public fi rms.
Description
Keywords
Crisis financiera, Volatilidad, Previsión, Activos financieros, Crédito