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Essays in macro-finance

Abstract : This dissertation consists of three essays in financial macroeconomics. The methodological approach common to the first two articles is the application of the search and matching theory to financial markets. The third essay builds on the literature on rare events. In the first article, I develop a tractable two-country model in which financial contagion may arise despite a flexible exchange rate regime and substitutability between home and foreign financial assets, contrary to the open-economy standard results under these two conditions. While monetary contractions imply negative output co-movements, in line with the literature, non-walrasian shocks to banks’ funding costs do generate the contagion. The second essay analyzes the role of bankers’ behavior in bank default. The model accounts for heterogeneity in entrepreneurs’ productivity and information asymmetry at the expense of capital holders. Moral hazard arises following a productivity shock: bankers tend to choose investments that are more profitable in the short-run but whose risk is borne by the financiers. This mechanism magnifies credit rationing in the economy and contributes to bank default. The third article examines the macroeconomic impact of a change in the probability of rare events in a New Keynesian model. A rise in the probability of disaster is sufficient to generate a recession without effective occurrence of the disaster. After accounting for monopolistic competition and price stickiness, the responses of consumption and wages are also reminiscent of distressed times. The article thus provides a framework of the dynamic effects of rare events, particularly suitable for further policy analysis.
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Marlène Isoré. Essays in macro-finance. Economics and Finance. Institut d'études politiques de Paris - Sciences Po, 2012. English. ⟨NNT : 2012IEPP0029⟩. ⟨tel-03669376⟩

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