Essays in financial intermediation
Abstract/Contents
- Abstract
- This dissertation sheds light on how the interaction between banks affects the functioning of the financial intermediary by applying tools and concepts from industrial organization to financial intermediation. The first chapter studies systemic risk in the interbank market. We first establish that in the German interbank lending market, a few large banks intermediate funding flows between many smaller periphery banks. Shocks to these intermediary banks in the financial crisis spill over to the activities of the periphery banks. We then develop a network formation model in which banks trade off the costs and benefits of link formation to explain these patterns. The model is structurally estimated using banks' preferences as revealed by the observed network structure in the pre-crisis period. It explains why the interbank intermediation arrangement arises, estimates the frictions underlying the arrangement, and quantifies how shocks are transmitted across the network. Model estimates based on pre-crisis data successfully predict changes in network-links and in lending arising from the crisis-shocks to the intermediary banks. The model is used to quantify the systemic risk of a single intermediary and the impact of ECB funding in reducing this risk. The second chapter demonstrates the impact of Treasury supply on commercial banks' funding. We show that banks widen their deposit spread as Treasury supply increases, leading to a net deposit outflow. At the same time, wholesale funding ratios increase. Both effects are heterogeneous - banks in more competitive markets experience larger outflows and more pronounced jumps in wholesale funding. Results remain robust after controlling for investment opportunities and Fed funds rate changes. The empirical findings are rationalized with a search model, in which banks' market power stems from the presence of inattentive depositors. Consistent with \citet{drechsler2016deposits}, the model predicts the opposite effect for Fed fund rate hikes, i.e., a more substantial response in less competitive markets. We shed light on the interaction between monetary and fiscal policy by examining the effects of the recent Reverse Repurchase Facility.
Description
| Type of resource | text |
|---|---|
| Form | electronic resource; remote; computer; online resource |
| Extent | 1 online resource. |
| Place | California |
| Place | [Stanford, California] |
| Publisher | [Stanford University] |
| Copyright date | 2018; ©2018 |
| Publication date | 2018; 2018 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Author | Ma, Yiming |
|---|---|
| Degree supervisor | Krishnamurthy, Arvind |
| Thesis advisor | Krishnamurthy, Arvind |
| Thesis advisor | Seru, Amit |
| Thesis advisor | Zwiebel, Jeffrey |
| Degree committee member | Seru, Amit |
| Degree committee member | Zwiebel, Jeffrey |
| Associated with | Stanford University, Graduate School of Business. |
Subjects
| Genre | Theses |
|---|---|
| Genre | Text |
Bibliographic information
| Statement of responsibility | Yiming Ma. |
|---|---|
| Note | Submitted to the Graduate School of Business. |
| Thesis | Thesis Ph.D. Stanford University 2018. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2018 by Yiming Ma
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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