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dc.contributor.authorTHALER, Dominik
dc.date.accessioned2016-10-14T16:45:28Z
dc.date.available2016-10-14T16:45:28Z
dc.date.issued2016
dc.identifier.citationFlorence : European University Institute, 2016en
dc.identifier.urihttp://hdl.handle.net/1814/43669
dc.descriptionDefence date: 7 October 2016en
dc.descriptionExamining Board: Professor Evi Pappa, EUI, Supervisor; Professor Árpád Ábrahám, EUI; Professor Luisa Lambertini, École Polytechnique Fédérale de Lausanne (EPFL); Dr. Peter Karadi, European Central Banken
dc.description.abstractThe first chapter of this thesis, joint with Angela Abbate analyses the importance of the risk-taking channel for monetary policy. To answer this question, we develop and estimate a quantitative monetary DSGE model where banks choose excessively risky investments, due to an agency problem which distorts banks’ incentives. As the real interest rate declines, these distortions become more important and excessive risk taking increases, lowering the efficiency of investment. We show that this novel transmission channel generates a new and quantitatively significant monetary policy trade-off between inflation and real interest rate stabilization: it is optimal for the central bank to tolerate greater inflation volatility in exchange for lower risk taking. The second chapter develops a quantitative model of sovereign default with endogenous default costs to propose a novel answer to the question why governments repay their debt. In the model domestic banks are exposed to sovereign debt. Hence sovereign default causes large losses for the banks, which translate into a financial crisis. The government trades these costs off against the advantage of not repaying international investors. Besides replicating business cycle moments, the model is able to generate not only output costs of a realistic magnitude, but also endogenously predicts that default is followed by a period during which no new foreign lending takes place. The duration of this period matches empirical estimates. The third chapter outlines a method to reduce the computationally necessary state space for solving dynamic models with global methods. The idea is to replace several state variables by a summary state variable. This is made possible by anticipating future choices that depend on one of the replaced variables. I explain how this method can be applied to a simple portfolio choice problem.en
dc.description.tableofcontents-- I. Monetary policy an the asset risk taking channel -- II. Austerity to save the banks? A quantitative model of sovereign default with endogenous default costs and a financial sector -- III. Reducing the computationally necessary state space by anticipating future choices sector
dc.format.mimetypeapplication/pdfen
dc.language.isoenen
dc.relation.ispartofseriesEUI PhD thesesen
dc.relation.ispartofseriesDepartment of Economicsen
dc.rightsinfo:eu-repo/semantics/openAccessen
dc.titleEssays on macroeconomics with financial frictionsen
dc.typeThesisen
dc.identifier.doi10.2870/0835


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