Essays on aggregate dynamics: externalities, liquidity and financial crises
In the second chapter, we consider a mechanism of unstable fluctuations of aggregate investments by means of a global game approach. For this purpose, we extended a static global game to a dynamic one and paid attention to the effect of past aggregate investments on current profitability. Once this...
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| Format: | Thesis (University of Nottingham only) |
| Language: | English |
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2012
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| Online Access: | https://eprints.nottingham.ac.uk/12525/ |
| _version_ | 1848791518885707776 |
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| author | Ochiai, Hiroshi |
| author_facet | Ochiai, Hiroshi |
| author_sort | Ochiai, Hiroshi |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | In the second chapter, we consider a mechanism of unstable fluctuations of aggregate investments by means of a global game approach. For this purpose, we extended a static global game to a dynamic one and paid attention to the effect of past aggregate investments on current profitability. Once this effect of aggregate investments between periods is taken into account, we can show that firms’ equilibrium strategies of investments become highly volatile over time. Moreover, long persistence of high or low economic activity can be explained by this model as well.
The third chapter examines the effect of firms’ funding liquidity on macroeconomic dynamics and the role of liquidity markets. Here, we regard liquidity as firms’ accumulated net worth and introduce heterogeneity between firms with regard to their productivities and accumulation of their net worth. From our analysis, we show that under existence of externality between probabilities of liquidity shocks 1) the economy without liquidity markets is highly volatile. 2) Liquidity markets insulate the economy from liquidity shocks. 3) During an unstable economic environment, the economic activity can sharply drop in the existence of liquidity markets.
The fourth chapter aims at showing risk shifting behaviour of financial intermediaries in the context of an economic growth model to analyze financial crises. In the low capitalized economy in which a rate of return on safe assets is high and households’ assets are scarce, investing in corporate sectors is more profitable than that of risky assets because the option value from investing in risky assets is low. However, as the economy grows, the rate of return on safe assets is decreasing whereas individual assets are increasing. In this situation, the option values of risky assets are increasing, which gives banks incentive to invest in risky assets leading some of the banks to be insolvent. |
| first_indexed | 2025-11-14T18:29:47Z |
| format | Thesis (University of Nottingham only) |
| id | nottingham-12525 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T18:29:47Z |
| publishDate | 2012 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-125252025-02-28T11:19:46Z https://eprints.nottingham.ac.uk/12525/ Essays on aggregate dynamics: externalities, liquidity and financial crises Ochiai, Hiroshi In the second chapter, we consider a mechanism of unstable fluctuations of aggregate investments by means of a global game approach. For this purpose, we extended a static global game to a dynamic one and paid attention to the effect of past aggregate investments on current profitability. Once this effect of aggregate investments between periods is taken into account, we can show that firms’ equilibrium strategies of investments become highly volatile over time. Moreover, long persistence of high or low economic activity can be explained by this model as well. The third chapter examines the effect of firms’ funding liquidity on macroeconomic dynamics and the role of liquidity markets. Here, we regard liquidity as firms’ accumulated net worth and introduce heterogeneity between firms with regard to their productivities and accumulation of their net worth. From our analysis, we show that under existence of externality between probabilities of liquidity shocks 1) the economy without liquidity markets is highly volatile. 2) Liquidity markets insulate the economy from liquidity shocks. 3) During an unstable economic environment, the economic activity can sharply drop in the existence of liquidity markets. The fourth chapter aims at showing risk shifting behaviour of financial intermediaries in the context of an economic growth model to analyze financial crises. In the low capitalized economy in which a rate of return on safe assets is high and households’ assets are scarce, investing in corporate sectors is more profitable than that of risky assets because the option value from investing in risky assets is low. However, as the economy grows, the rate of return on safe assets is decreasing whereas individual assets are increasing. In this situation, the option values of risky assets are increasing, which gives banks incentive to invest in risky assets leading some of the banks to be insolvent. 2012-04 Thesis (University of Nottingham only) NonPeerReviewed application/pdf en arr https://eprints.nottingham.ac.uk/12525/1/PhD_thesis_Hiroshi_Ochiai_.pdf Ochiai, Hiroshi (2012) Essays on aggregate dynamics: externalities, liquidity and financial crises. PhD thesis, University of Nottingham. Business cycles financial crises |
| spellingShingle | Business cycles financial crises Ochiai, Hiroshi Essays on aggregate dynamics: externalities, liquidity and financial crises |
| title | Essays on aggregate dynamics: externalities, liquidity and financial crises |
| title_full | Essays on aggregate dynamics: externalities, liquidity and financial crises |
| title_fullStr | Essays on aggregate dynamics: externalities, liquidity and financial crises |
| title_full_unstemmed | Essays on aggregate dynamics: externalities, liquidity and financial crises |
| title_short | Essays on aggregate dynamics: externalities, liquidity and financial crises |
| title_sort | essays on aggregate dynamics: externalities, liquidity and financial crises |
| topic | Business cycles financial crises |
| url | https://eprints.nottingham.ac.uk/12525/ |