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- W2951957493 abstract "This thesis studies how information imperfectionsaffect financial markets and the macroeconomy. Chapter 1 considersan economy where investors delegate their investment decisions tofinancial institutions that choose across multiple investmentopportunities featuring different levels of idiosyncratic risk anddifferent degrees of correlation with the aggregate of the economy.Investors solve an optimal contracting problem to induce financialinstitutions to allocate their investment optimally. We then studyhow investment decisions are affected when financial securities areintroduced that allow agents to trade their risks. Investors do nothave the necessary information to understand these securities, butgive incentives to financial institutions to hedge certain risks.We show that hedging idiosyncratic risks ameliorates the agencyproblem between investors and financial institutions and reducesaggregate volatility. On the contrary, when aggregate risk can behedged the agency problem worsens and aggregate volatilityincreases. Finally, we study the efficiency properties of theequilibrium and the potential role for financial regulation.Chapter 2 studies the welfare effects of the information containedin macroeconomic statistics, central-bank communications, or newsin the media? We address this question in a business-cycleframework that nests the neoclassical core of modem DSGE models.Earlier lessons that were based on beauty contests (Morris andShin, 2002) are found to be inapplicable. Instead, the social valueof information is shown to hinge on essentially the same conditionsas the optimality of stabilization policies. More preciseinformation is unambiguously welfare-improving as long as thebusiness cycle is driven primarily by technology and preferenceshocks-but can be detrimental when shocks to markups and wedgescause sufficient volatility in output gaps. Finally, chapter 3studies how market signals-such as stock prices-can help alleviatethe severity of the asymmetric information problem in credit andliquidity management. Asymmetric information hinders the ability ofborrowers (firms, investment banks, etc) to undertake profitableinvestment opportunities and to insure themselves against liquidityshocks. On the equilibrium path, creditors need not learn anythingfrom market signals because they can use a menu of contracts toscreen the different types of borrowers. Nevertheless, byconditioning liquidity insurance on ex post price signals,creditors are able to provide the borrowers with better incentivesfor truth-telling. At the same time, prices depend on the liquiditythat creditors offer to the borrowers. This two-way feedbackimpacts the design of the optimal contract and potentiallygenerates multiple equilibria in financial markets." @default.
- W2951957493 created "2019-06-27" @default.
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- W2951957493 date "2012-01-01" @default.
- W2951957493 modified "2023-09-24" @default.
- W2951957493 title "Essays in macroeconomics : information and financialmarkets; Information and financial markets" @default.
- W2951957493 hasPublicationYear "2012" @default.
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