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Essays on Asymmetric Information, Liquidity, and Unemployment.

Record Type:	Language materials, manuscript : Monograph/item
Title/Author:	Essays on Asymmetric Information, Liquidity, and Unemployment./
Author:	Bajaj, Ayushi.
Description:	1 online resource (115 pages)
Notes:	Source: Dissertation Abstracts International, Volume: 79-03(E), Section: A.
Subject:	Economics. -
Online resource:	click for full text (PQDT)
ISBN:	9780355307283

Essays on Asymmetric Information, Liquidity, and Unemployment.
Bajaj, Ayushi.

Essays on Asymmetric Information, Liquidity, and Unemployment. - 1 online resource (115 pages)

Source: Dissertation Abstracts International, Volume: 79-03(E), Section: A.

Thesis (Ph.D.)--University of California, Irvine, 2017.

Includes bibliographical references

Decentralized markets where assets are useful as medium of exchange are also usually subject to private information. In the first chapter, I analyze how adverse selection affects liquidity and prices in such markets by studying the Shi (1995) and Trejos and Wright (1995) model with Lucas trees under adverse selection. While most studies focus on either pooling or separating equilibrium, I adapt the undefeated equilibrium refinement to make the selection based on fundamentals. Under pooling, the high-quality asset accepts a pooled price, and under separating is willing to signal quality through retention. A negative shock to the quality or quantity of lemons implies a switch in regime from no-information (pooling) to information revelation (separating) which leads to a discontinuous fall in aggregate welfare. In the second chapter I apply insights from the first chapter to help account for the debasement puzzle by interpreting Lucas trees as commodity money of different weights. Debasements constitute a puzzle under standard price theory because people voluntarily exchanged heavy coins for lighter ones; the difference being kept as seigniorage. To resolve this, I adopt Velde, Weber and Wright (1999) featuring a decentralised market with private information on indivisible coins. To disentangle indivisibility from imperfect recognizability, I use a proxy for divisibility by allowing lotteries on coins in trade. Indivisibility accounts for debasement if agents need a medium of exchange for low-value goods, for which heavy coins would not be traded. And, even a small degree of imperfect recognizability provides incentives for debasement due to adverse selection. Finally, in the third chapter I model household's portfolio choice with an endogenous supply of assets under uncertainty to analyze its effect on real interest rates and unemployment. Asset returns typically reflect a risk and liquidity premium, the size of which depends on the state of the economy. This in turn affects unemployment as firms respond to interest rates. In this chapter, I explicitly model demand and supply of liquid assets under uncertainty. Households adjust their portfolios depending on their liquidity needs, and supply of liquid assets is affected by firms' entry decision. An increase in aggregate uncertainty raises interest rates thereby fewer firms enter, and if accompanied by a fall in productivity, unemployment rises by even more. A self-financed private asset purchase program can increase liquidity but leaves unemployment unchanged.

Electronic reproduction.
Ann Arbor, Mich. :
ProQuest,
2018

Mode of access: World Wide Web

ISBN: 9780355307283Subjects--Topical Terms:

555568
Economics.
Index Terms--Genre/Form:

554714
Electronic books.

Essays on Asymmetric Information, Liquidity, and Unemployment.
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500 $a Source: Dissertation Abstracts International, Volume: 79-03(E), Section: A.
500 $a Adviser: Guillaume Rocheteau.
502 $a Thesis (Ph.D.)--University of California, Irvine, 2017.
504 $a Includes bibliographical references
520 $a Decentralized markets where assets are useful as medium of exchange are also usually subject to private information. In the first chapter, I analyze how adverse selection affects liquidity and prices in such markets by studying the Shi (1995) and Trejos and Wright (1995) model with Lucas trees under adverse selection. While most studies focus on either pooling or separating equilibrium, I adapt the undefeated equilibrium refinement to make the selection based on fundamentals. Under pooling, the high-quality asset accepts a pooled price, and under separating is willing to signal quality through retention. A negative shock to the quality or quantity of lemons implies a switch in regime from no-information (pooling) to information revelation (separating) which leads to a discontinuous fall in aggregate welfare. In the second chapter I apply insights from the first chapter to help account for the debasement puzzle by interpreting Lucas trees as commodity money of different weights. Debasements constitute a puzzle under standard price theory because people voluntarily exchanged heavy coins for lighter ones; the difference being kept as seigniorage. To resolve this, I adopt Velde, Weber and Wright (1999) featuring a decentralised market with private information on indivisible coins. To disentangle indivisibility from imperfect recognizability, I use a proxy for divisibility by allowing lotteries on coins in trade. Indivisibility accounts for debasement if agents need a medium of exchange for low-value goods, for which heavy coins would not be traded. And, even a small degree of imperfect recognizability provides incentives for debasement due to adverse selection. Finally, in the third chapter I model household's portfolio choice with an endogenous supply of assets under uncertainty to analyze its effect on real interest rates and unemployment. Asset returns typically reflect a risk and liquidity premium, the size of which depends on the state of the economy. This in turn affects unemployment as firms respond to interest rates. In this chapter, I explicitly model demand and supply of liquid assets under uncertainty. Households adjust their portfolios depending on their liquidity needs, and supply of liquid assets is affected by firms' entry decision. An increase in aggregate uncertainty raises interest rates thereby fewer firms enter, and if accompanied by a fall in productivity, unemployment rises by even more. A self-financed private asset purchase program can increase liquidity but leaves unemployment unchanged.
533 $a Electronic reproduction. $b Ann Arbor, Mich. : $c ProQuest, $d 2018
538 $a Mode of access: World Wide Web
650 4 $a Economics. $3 555568
650 4 $a Economic theory. $3 809881
655 7 $a Electronic books. $2 local $3 554714
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690 $a 0511
710 2 $a ProQuest Information and Learning Co. $3 1178819
710 2 $a University of California, Irvine. $b Economics - Ph.D.. $3 1179454
856 4 0 $u http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=10286631 $z click for full text (PQDT)