Three Essays on Liquidity, Asset Prices and Productivity
Date Issued
2010
Date
2010
Author(s)
Li, Ying-Syuan
Abstract
The thesis consists of three parts. We first consider an economy in which lenders cannot force borrowers to repay their debts, and borrowers are required to pledge some assets to secure loans. From deriving the asset pricing equations we illustrate the interactions between asset prices, liquidity, and credit constraints. The asset commands a liquidity premium when credit constraints bind, and the premium is higher when credit rationing is more severe. Monetary policies influence macroeconomic outcomes through the channel of endogenous credit constraints, and the effects depend on the technology to deter default. If exclusion is feasible, aggregate liquidity and output rise because inflation raises the cost of losing the access to future credit. While the asset price is reduced by policy, liquidity may be increased via a higher loan-to-value ratio.
In chapter 3, we develop a model with heterogenous agents to study credit rationing, allocations and the distributional effects of monetary policy. Since productivity differentiates the ability for repayment and gains from trade, to induce voluntary repayment, banks would set the credit limit based on the type. The cost of default -- being excluded from the banking system - is smaller for agents with lower productivity, so banks offer them less credit when borrowing constraints bind. Inflation has distributional effects on the credit constraints and welfare, and leads to more severe credit rationing across heterogeneous agents. If credit rationing occurs, high-type agents gain but low-type agents suffer, in an environment with higher inflation.
In chapter 4, we develop a model to highlight the dual role of the real asset in generating liquidity from being used as a means of payment and as collateral. The asset commands a liquidity premium if the amounts of means of payments are not sufficient to achieve the first-best allocation, or credit constraints bind.
Subjects
Liquidity
Asset prices
Credit Constraints
Collateral
Heterogeneity
Banking
Monetary Policy
SDGs
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
ntu-99-D93323001-1.pdf
Size
23.53 KB
Format
Adobe PDF
Checksum
(MD5):6a97868bf2c77f85331378b2cd16efe9