Li YU will defend her thesis on Monday 12 June at 14:00 (Auditorium 3)
« Essays on Macro-Finance and Uncertainty »
Supervisor: Professor Patrick Fève
To attend the conference, please contact the secretariat Christelle Fotso Tatchum
Memberships are:
- Patrick Fève, Toulouse School of Economics, UT Capitole, Supervisor
- Fabrice Collard, CNRS, Toulouse School of Economics, President
- Martial Dupaigne, University of Montpellier, TSE, examinator
- Melika Ben Salem, University Gustave Eiffel
Abstract :
This thesis consists of four independent chapters which study financial intermediaries and uncertainty from a macroeconomic perspective.
The first chapter provides new empirical evidence on the heterogeneity inside financial intermediaries. Using a structural VAR model, we run two sets of experiments to explore the reaction of different banking sectors to different shocks. In the first experiments, we adopt short-run and proxy identification methods to check how they react to monetary policy shocks and discover that the same contractionary monetary shock triggers different responses in commercial banks and government-sponsored enterprises. In the second experiment, we use the max share identification method to respectively determine the shocks that affect banks and shadow banks the most. The shocks likely differ highly across commercial banks and GSEs, but commercial and private shadow banks might be highly connected.
The second chapter studies the impact of monetary policy on the credit allocation of globally operating banks. We develop an analytical framework for global banking based on a portfolio approach. We find that in times of low-interest rates and large balance sheets, a further cut in the interest rate decreases bank profitability and has opposite effects on domestic and foreign lending, thereby increasing home bias. Extending the model to a dynamic general equilibrium setup with nominal rigidities, we find that with the portfolio re-balancing of the global banks, the prolonged period of low-interest rates is accompanied by a persistently high home bias, and the overall effectiveness of monetary policy is compromised.
The third chapter empirically examines the home bias of globally operating banks. We collect quarterly data on a country level for the past two decades and compute the bank home bias index. Banks have exhibited a V-shaped home bias for many countries during the past two decades. Next, we analyze the drivers of banks' home bias using a structural vector autoregression model on US data. The results show that foreign uncertainty explains over forty percent of home bias variation. In addition, the monetary policy rate increases and then suppresses bank home bias. Lastly, we study the cyclicality of bank home bias and confirm that the bias is negatively correlated with domestic output.
The last chapter explores different types of uncertainty shocks arising from different types of financial assets, with empirical evidence and a theoretical framework. First, by applying novel identification methods in structural autoregression (SVAR) models on different asset categories, we provide novel evidence on the heterogeneity in responses of real economic variables to uncertainty shocks. We show that uncertainty shocks generated by stock volatility have less impact than gold volatility in the post-crisis era. Both types of uncertainty shocks induce changes in the sentiment of both investors and households. Based on these findings, we sketch a simple theoretical framework that illustrates how fundamental uncertainty, asset-specific characteristics, and non-fundamental behavioral factors contribute to asset volatilities.
