Diss. Stockholm : Handelshögskolan, 2005.

International finance is often understood to be a rational practice, taking place within an autonomous, coherent and clearly bounded structure. This thesis questions the naturalness implied by such understandings of the international financial system. It argues that the contingencies and ambiguities of financial history have been largely written out of the discipline of International Political Economy (IPE) in general and the study of international finance in particular. The thesis presents a detailed account of the conceptual histories that enable us to think of a domain called finance. It does so in terms of a 'genealogy,' the concept offered by French philosopher Michel Foucault to denote a historical study that resists being a linear and frictionless account of the emergence of modern practices. A genealogy of finance discusses the continggeenntt emergence of fi'n ancial thought, thus arguing that no logical or evolutionary trajectory for the development of fi' nancial rationality was implicit in history or human nature. The thesis analyses a range of archival materials debating the emerging fin ' ancial sphere in London and NewYork, beginning with the birth of the credit economy in seventeenth-century England and proceeding into to the 1990s. The analysis' looks at political contestations over understandings of time and money, the gendered discourse of credit and credibility, the proper meaning of the free market, understandings of financial crisis, the morality of speculation, the differences between gambling and fin' ance, and the imagination of fi' nance as a rational and scientific practice. The thesis emphasises how these political controversies assume, in' yoke and debate a subject called 'fin ' ancial man.' The debates analysed in this thesis have shaped the regulatory and institutional structures of modern in ' ternational fin ' ance. In an era when fin ' ancial practices are closed off from democratic politics through the assertion that fin' ance is too specialist for broad-based public debate, the exposure of contingencies and ambiguities in financial practices must be regarded as a political critique.

The thesis contributes to the study of the relationship between competition and incentives, when asymmetric information is taken into account. Our main focus is the analysis of loan relationships. The first two chapters analyze the relationship between borrowers' financial constraints and endogenous fluctuations. We try to provide a potential departure from the traditional corporate finance theories by showing that the characteristics of firms' capital structure (i.e. their debt-to-equity ratio) can be affected by macroeconomic conditions. We construct a dynamic economy with asymmetric information in the credit market. The features of optimal securities issued at equilibrium are influenced by macroeconomic conditions. As a by-product, the debt-to-equity ratio in the overall economy will evolve according to the dynamics of aggregate variables. The remaining of the thesis develops a theoretical analysis of credit relationships where multiple financiers compete over the loan contracts they are offering to entrepreneurs-borrowers. To this extent, Chapter 3 proposes a unified framework to analyze the so-called literature on competing mechanisms and provides new results in terms of characterizing the equilibria of multi-principal multi-agent games. In the specific context of common agency games, we show that the introduction of a separability requirement on agent's preferences with respect to the contract offers she receives from principals is a sufficient condition to retrieve the Revelation Principle. Importantly, no restriction on principals' preferences is introduced. Chapter 4 investigates credit market relationships when competing lenders are explicitly considered. A reformulation of the traditional credit channel of Monetary Policy is then suggested. When lenders are strategically competing on their credit contract offers, positive-profit equilibria typically arise. Our analysis considers both the exclusive case and the non-exclusive one and it argues that monetary factors may affect the real sector mainly by modifying the structure of markets. The last chapter discusses the welfare implications of contractual externalities that arise in the presence of multiple financiers. We consider a scenario where a Social Planner is subject to the same informational constraints faced by principals in a simple model of the credit market. We identify conditions that sustain constrained-efficiency of market equilibria.

Diss. Stockholm : Handelshögskolan, 2005

Diss. Uppsala : Univ., 2003.

This dissertation consists of three separate essays on Peer-to-Peer (P2P) online credit markets. The first essay presents new empirical evidence of decreases in loan demand and repayment when prices in the market are determined by competing lenders in auctions as compared to the case in which a platform directly controls all prices. The paper develops an econometric model of loan demand and repayment which is then used to predict borrower choices when they are offered prices set by lenders in a market. I find that when lenders set prices, borrowers are more likely to pick loans of shorter maturity and smaller sizes, and repay less. Aggregated at the market level, demand and repayment of credit fall by 10% and 2%, respectively. In the second paper, I quantify the effects of implementation of finer credit scoring on credit demand, defaults and repayment in the context of a large P2P online credit platform. I exploit an exogenous change in the platform's credit scoring policy where the centralized price setting rules ensure that the one-to-one relationship between credit scores and prices remains intact unlike in a traditional credit market where it is broken. The results show that a 1% increase in interest rate due to the implementation of finer credit scoring results in an average decrease of 0.29% in the requested loan amount, an average increase of 0.01 in the fraction of borrowers who default and an average increase of 0.02 in the fraction of loan repaid. These findings contribute to a better understanding of how a reduction in information asymmetry affects borrower choices in a credit market. The third paper explores the main drivers behind the geographic expansion in demand for credit from P2P online platforms. It uses data from the two largest platforms in the United States to conduct an empirical analysis. By exploiting heterogeneity in local credit markets before the entry of P2P online platforms, the paper estimates the effect of local credit market conditions on demand for credit from P2P platforms. The paper uses a spatial autoregressive model for the main specification. We find that P2P consumer credit expanded more in counties with poor branch networks, lower concentration of banks, and lower leverage ratios.

This dissertation is a collection of essays on financial market development and economic growth. In contrast to existing literature, which considers credit for investment along, we investigate the relationship between credit market development and economic growth in the framework where both investment and consumption are financed via credit markets. The environment developed on this dissertation creates a role for each kind of credit to play. First, credit market conditions of entrepreneurs and consumers are related and depend on each other. Second, the interactions between consumers and entrepreneurs are of importance for economic growth. The models are empirically relevant, as they can explain why the effect of credit market development on economic growth appears to differ between high-income and middle- and low-income countries. / Ph. D.

<p>This thesis consists of five chapters.</p><p><b>Chapter 1 and 2 </b>The first chapter presents the introduction and the summary and the second chapter provides details on the survey and the data collection.</p><p>Chapter 3 The demand and supply of credit in the rural finance markets are investigated in this paper using data on 989 households, in Orissa, India. The aim is to study the effects of household, farm productive characteristics and the policy variables on the demand and supply of credit. A type 3 Tobit model is estimated which corrects for sample selection and endogeniety bias. In addition, a generalised Double Hurdle model is estimated where the household's access to credit is treated distinctly from decisions about the interest rate charged. The results from the type 3 tobit model suggest that the size of the operational holdings, net-wealth, the dependency ratio, educational level of the household and the wages and output prices are important determinants of the demand and supply of credit. The Double Hurdle model suggests the important result that the size of land owned plays a crucial role in whether the household obtains a loan or not.</p><p>Chapter 4 Based on the 'Rural Credit Market Survey of the Puri district in India', this paper investigates evidence on segmentation in the rural credit markets of Puri district. It further investigates the presence of any systematic association between the type of collateral offered by the household and the rate of interest at which it borrows. The data shows differences in the loan characteristics between the households borrowing from the formal and the informal sector. The empirical results confirm the presence of segmentation in the Puri credit market. For the households borrowing from the informal sector and the moneylenders, evidence also shows that the marketability of the collateral is inversely related to the interest rate. However, no such clear relationship is found for households borrowing from the formal sector.</p><p><b>Chapter 5 </b>In the theoretical and the empirical literature on rural credit markets it is widely assumed that the households are credit rationed in the formal sector, which offers subsidised credit. This view rests on the assumptions that all households have a positive demand for formal credit and that it is the cheaper source of credit. Three different models of formal credit rationing are estimated in this paper. The first model is a conventional credit-rationing model. The second model assumes that the probability to borrow from the formal sector is jointly determined by the demand for credit and the decision of the bank on access. Finally, the third model relaxes both these assumptions and the household chooses between borrowing from the formal or the informal sector. The results confirm that the access to the formal sector in the Puri rural credit markets is limited and that there exists a high demand for credit. This suggests a high degree of effective credit rationing by the formal sector in Puri. </p>

This paper seeks to fill a gap in the literature regarding the consequences of banning ‘naked’ Credit Default Swaps (CDS). In particular, I use the European Union’s Ban on ‘naked” Sovereign CDS as an event study to evaluate the impact that banning such derivative products has on the price discovery process in the credit markets. Using both Granger Causality tests and a Vector Error Correction Model, I find that before November 1, 2012, CDS are the clear price leader in the credit markets. However, since the official date the regulation was put into effect, CDS’ price leadership was eroded. Moreover, after the ban, CDS and Bond Yield Spreads are no longer cointegrated in the long run, suggesting that different pricing mechanisms now exist between the two securities

This thesis consists of five chapters. Chapter 1 and 2 The first chapter presents the introduction and the summary and the second chapter provides details on the survey and the data collection. Chapter 3 The demand and supply of credit in the rural finance markets are investigated in this paper using data on 989 households, in Orissa, India. The aim is to study the effects of household, farm productive characteristics and the policy variables on the demand and supply of credit. A type 3 Tobit model is estimated which corrects for sample selection and endogeniety bias. In addition, a generalised Double Hurdle model is estimated where the household's access to credit is treated distinctly from decisions about the interest rate charged. The results from the type 3 tobit model suggest that the size of the operational holdings, net-wealth, the dependency ratio, educational level of the household and the wages and output prices are important determinants of the demand and supply of credit. The Double Hurdle model suggests the important result that the size of land owned plays a crucial role in whether the household obtains a loan or not. Chapter 4 Based on the 'Rural Credit Market Survey of the Puri district in India', this paper investigates evidence on segmentation in the rural credit markets of Puri district. It further investigates the presence of any systematic association between the type of collateral offered by the household and the rate of interest at which it borrows. The data shows differences in the loan characteristics between the households borrowing from the formal and the informal sector. The empirical results confirm the presence of segmentation in the Puri credit market. For the households borrowing from the informal sector and the moneylenders, evidence also shows that the marketability of the collateral is inversely related to the interest rate. However, no such clear relationship is found for households borrowing from the formal sector. Chapter 5 In the theoretical and the empirical literature on rural credit markets it is widely assumed that the households are credit rationed in the formal sector, which offers subsidised credit. This view rests on the assumptions that all households have a positive demand for formal credit and that it is the cheaper source of credit. Three different models of formal credit rationing are estimated in this paper. The first model is a conventional credit-rationing model. The second model assumes that the probability to borrow from the formal sector is jointly determined by the demand for credit and the decision of the bank on access. Finally, the third model relaxes both these assumptions and the household chooses between borrowing from the formal or the informal sector. The results confirm that the access to the formal sector in the Puri rural credit markets is limited and that there exists a high demand for credit. This suggests a high degree of effective credit rationing by the formal sector in Puri.