Date of Award
Doctor of Philosophy (PhD)
The dissertation, which consists of two chapters, is devoted to exploring the role of informational friction in monetary economics and finance.
Chapter Ⅰ: COUNTERFEITING, SCREENING AND GOVERNMENT POLICY.
In this chapter, I construct a search theoretic model of money in which counterfeit money can be produced at a cost but agents can screen for fake money also at a cost. Counterfeiting can occur in equilibrium when both costs and the inflation rate are sufficiently low. Optimal monetary policy is the Friedman rule. However, the rationale for the Friedman rule in an economy with the circulation of counterfeit money differs from the conventional mechanism that holds in the model when counterfeiting does not occur. I also study optimal anti-counterfeiting policy that determines the counterfeiting cost and the screening cost.
Chapter Ⅱ: CENTRAL BANK PURCHASES OF PRIVATE ASSETS: AN EVALUATION
In this chapter, I develop a model of asset exchange and monetary policy, augmented to incorporate a housing market and a frictional financial market. Homeowners take out mortgages with banks using their residential properties as collateral to finance consumption. Banks use mortgages and government liabilities as collateral to secure deposit contracts, but they have an incentive to fake the quality of mortgages at a cost. Quantitative easing (QE) in the form of central bank purchases of mortgages from private banks has effects on the composition of assets in the economy, and on the incentive structure of the private sector. When the incentive problem is severe, the central bank can unambiguously improve welfare by purchasing mortgages. However, when it is not severe, the central bank's mortgage purchases cause a housing construction boom and sometimes can lower exchange in the economy, hence reducing welfare.
Chair and Committee
Gaetano Antinolfi, Jason Donaldson, Carl Sanders, Yongseok Shin,
Kang, Kee Youn, "Essays on Liquidity, Informational Frictions, and Monetary Policy" (2017). Arts & Sciences Electronic Theses and Dissertations. 1248.