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University of Pennsylvania

Financial Frictions

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Essays In Macroeconomic Dynamics And The Financial Market, Wen Yao May 2011

Essays In Macroeconomic Dynamics And The Financial Market, Wen Yao

Publicly Accessible Penn Dissertations

This thesis explores the important link between macroeconomic dynamics and the financial sector. The first essay studies Epstein-Zin preferences, which are found to be able to account for both aggregate macroeconomic dynamics and asset prices. In the first essay, I compare different solution methods for computing dynamic stochastic general equilibrium (DSGE) models with Epstein-Zin preferences and stochastic volatility. I show that perturbation methods are an attractive approach for computing this class of problems. The second essay emphasizes the importance of frictions in the financial market on real economic activities. The model studies the international business cycle co-movements when financial frictions ...


Financial Frictions, Propagation Of Shocks, And Macroeconomic Volatility, Cristina Fuentes-Albero May 2010

Financial Frictions, Propagation Of Shocks, And Macroeconomic Volatility, Cristina Fuentes-Albero

Publicly Accessible Penn Dissertations

I study the evolution of aggregate volatility in the US during the postwar period by assessing the relative role played by financial shocks, technological progress, and changes in the financial system. Balance-sheet variables of firms have been characterized by greater volatility since the early 1970s. This Financial Immoderation has coexisted with the so-called Great Moderation, which refers to the slowdown in volatility of real and nominal variables since the mid 1980s. In the second chapter, I study the moderation in real variables calibrating a real business cycle model with two technology shocks. I consider several statistical specifications for technological progress ...