published_or_final_version / Economics and Finance / Master / Master of Economics

Faculty of Commerce, Law and Management University Of Witwatersrand 07 September 2016 / The purpose of this study is to identify whether the Law of One Price theory holds across bitcoin exchanges in different countries given the uniquely defining characteristics of bitcoin. This was explored using Johansen’s Cointegration to extract the economic relationship between the time series sampled. It was demonstrated in the results that the Law does not always hold, however this was dependent on which bitcoin exchange is being used. Prices across the same bitcoin exchanges were likely to hold because of similar transaction costs and the ease of trading. For the time series where the Law of One price did not hold, the explanatory factors could include the bitcoin market illiquidity and purposeful disequilibrium. Bitcoin is a fairly new concept and has been press-worthy in the finance, economic and technological spheres. In South Africa, awareness of the digital currency is low, as is an understanding of its features and the impact on the economy as well as society as a whole. This study therefore aims to explore bitcoin in a finance context, in terms of the Law of One Price, while briefly gaining an understanding of the digital currency itself. / MT2017

Po-yan Chiu. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1998. / Includes bibliographical references (leaves 83-86). / Abstract also in Chinese. / Abstract --- p.i / Acknowledgements --- p.iv / List of Figures --- p.vi / Chapter Chapter 1. --- Introduction --- p.1 / Chapter Chapter 2. --- Literature Review --- p.7 / Chapter 2.1 --- Monopolistic Competition and Policy Intervention --- p.7 / Chapter 2.2 --- Policy Interventions in Monetary Economies --- p.17 / Chapter Chapter 3. --- The Model --- p.19 / Chapter 3.1 --- Commodities --- p.19 / Chapter 3.2 --- Demands --- p.20 / Chapter 3.3 --- Equilibrium --- p.21 / Chapter 3.4 --- Open Economy --- p.24 / Chapter Chapter 4. --- Optimal Production Taxation --- p.28 / Chapter Chapter 5. --- Welfare Effect of Trade and the Optimal Tariff --- p.34 / Chapter 5.1 --- Welfare Effect of Trade --- p.34 / Chapter 5.2 --- Optimal Import Tariff --- p.38 / Chapter Chapter 6. --- Consumption Tax --- p.52 / Chapter 6.1 --- Closed Economy --- p.53 / Chapter 6.2 --- Open Economy --- p.55 / Chapter 6.3 --- Welfare Effects of Trade under Different Policies --- p.56 / Chapter Chapter 7. --- Concluding Remarks --- p.62 / Appendix --- p.65 / References --- p.83

Lee Sui Fung. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1999. / Includes bibliographical references (leaves 59-62). / Abstract also in Chinese. / Declaration --- p.i / Acknowledgement --- p.ii / Table of Contents --- p.iii / List of Illustrations --- p.v / Notation --- p.vi / Chapter Chapter 1 --- Introduction / Chapter 1.1. --- Chapter Preview --- p.1 / Chapter 1.2. --- Literature Review --- p.1 / Chapter 1.2.1. --- The Development of Research on Endogenous Growth Model --- p.1 / Chapter 1.2.2. --- The Development of Research on Dependent-Economy Model --- p.3 / Chapter 1.2.3. --- The Development of Research on Capital Accumulation and Economic Growth --- p.4 / Chapter 1.3. --- Thesis Objectives --- p.6 / Chapter 1.4. --- Organization of the Thesis --- p.7 / Chapter 1.5. --- Chapter Summary --- p.8 / Chapter Chapter 2 --- The Endogenous Growth Model / Chapter 2.1. --- Chapter Preview --- p.10 / Chapter 2.2. --- Theoretical Framework --- p.10 / Chapter 2.3. --- Determination of Macroeconomic Equilibrium --- p.16 / Chapter 2.3.1. --- Static Allocation Conditions --- p.17 / Chapter 2.3.2. --- Macrodynamic Equilibrium --- p.18 / Chapter 2.4. --- Chapter Summary --- p.21 / Chapter Chapter 3 --- The Steady-State Equilibrium / Chapter 3.1. --- Chapter Preview --- p.24 / Chapter 3.2. --- Conditions for Steady-State Equilibrium --- p.24 / Chapter 3.2.1. --- Existence and Uniqueness of Balanced Growth Equilibrium --- p.25 / Chapter 3.3. --- Long-Run Adjustment --- p.26 / Chapter 3.4. --- Application of the Model --- p.31 / Chapter 3.4.1. --- Increase in the Costs of Borrowing --- p.31 / Chapter 3.4.2. --- Increase in the Rate of Time Preference --- p.32 / Chapter 3.4.3. --- Increase in Domestic Productivity --- p.33 / Chapter 3.5. --- Chapter Summary --- p.33 / Chapter Chapter 4 --- The Transitional Dynamics / Chapter 4.1. --- Chapter Preview --- p.35 / Chapter 4.2. --- Derivation of Transitional Adjustment Paths --- p.35 / Chapter 4.3. --- Characterisation of the Transitional Dynamics --- p.38 / Chapter 4.3.1. --- Increase in the Costs of Borrowing --- p.41 / Chapter 4.3.2. --- Increase in the Rate of Time Preference --- p.43 / Chapter 4.4. --- Chapter Summary --- p.45 / Chapter Chapter 5 --- Conclusions --- p.46 / Appendix1 --- p.52 / Appendix2 --- p.58 / References --- p.59

Chen, Meichen. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2013. / Includes bibliographical references (leaves 34-37). / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Abstracts also in Chinese.

This thesis consists of two parts. In the first part, we concentrate on the computation of Market Equilibria and settle the long-standing open problem regarding the computation of an approximate Arrow-Debreu market equilibrium in markets with CES utilities. We prove that the problem is PPAD-complete when the Constant Elasticity of Substitution parameter $\rho$ is any constant less than -1. Building on this result, we introduce the notion of non-monotone utilities, which covers a wide variety of utility functions in economic theory, and prove that it is PPAD-hard to compute an approximate Arrow-Debreu market equilibrium in markets with linear and non-monotone utilities. In the second part, we study Revenue Maximization. We begin by resolving the complexity of the revenue-optimal Bayesian Unit-demand Item Pricing problem when the buyer's values for the items are independent. We show that the problem can be solved in polynomial time for distributions of support size 2; but its decision version is NP-complete for distributions of support size 3. Next, we study the optimal mechanism design problem for a single unit-demand buyer with item values drawn from independent distributions. We show that, for distributions of support-size 2 and the same high value, Item Pricing can achieve the same revenue as any menu of lotteries. On the other hand, we provide simple examples where randomization improves revenue. Finally, we show that unless the polynomial-time hierarchy collapses, namely P^{NP}=P^{#P}, there is no universal efficient randomized algorithm that implements an optimal mechanism even when distributions have support size 3.

This dissertation combines micro-level empirical analyses and general equilibrium models to study the issues of output price, price-cost markup, and business cycle dynamics. In the first chapter, I study how a credit crunch affects output price dynamics. I build a unique micro-level dataset that combines scanner-level prices and quantities with producer information, including the producer's banking relationships, inventory, and cash holdings. I exploit the Lehman Brothers' failure as a quasi-experiment and find that firms facing a negative credit supply shock decrease their output prices approximately 15% relative to their unaffected counterparts. I hypothesize that such firms reduce prices to liquidate inventory and to generate additional cash flow from the product market. I find strong empirical support for this hypothesis: (i) firms facing a negative bank shock temporarily decrease their prices and inventory and increase their market share and cash holdings relative to their counterparts, and (ii) this effect is stronger for firms and sectors with high initial inventory or small initial cash holdings. To discuss the aggregate implications of these findings, I integrate this micro-level study into a business cycle model by explicitly allowing for two identical groups of producers facing different degrees of credit supply shock. The model predicts that a negative credit supply shock leads to a large temporary drop in aggregate inflation---as a result of the aggressive liquidation of inventory---followed by an increase in inflation as producers eventually run out of inventory. This prediction for inflation and inventory dynamics is fully consistent with observations for the 2007-09 recession. In the second chapter, I study price-cost markup cyclicality. Existing empirical evidence on price-cost markup cyclicality is mixed. I find that markups are procyclical unconditionally, and procyclical conditional on demand shock using a flexible production function. The estimated production function features a larger input complementarity than that in a tightly parametrized production function (Cobb-Douglas and CES), producing both greater efficiency and higher markups during an expansion. These results have two striking implications: (i) much of the cyclicality in markups arises from input complementarity, rather than nominal rigidity, and (ii) the U.S. economy behaves as if it has increasing returns to scale. The third chapter studies the business cycle with a Translog production function. We empirically identify a complementarity between labor and energy that leads to procyclical returns to scale, which is not compatible with the tightly parameterized production function commonly used in the literature (Cobb-Douglas and CES). We, therefore, propose a flexible Translog production function that not only features complementarity-induced procyclical returns to scale but is also consistent with a balanced growth path. A simple calibrated business cycle model with the proposed production function generates strikingly data-consistent dynamics following demand shock without relying on either nominal rigidities or countercyclical markups. Our model also produces a stronger amplification effect than the model without complementarity. We then incorporate our production function into a benchmark medium-scale New Keynesian model (Smets and Wouters 2007) and repeat the business cycle accounting exercise. We find that input complementarity leads to a more dramatic decrease in the role of ''suspicious shocks" than of ''structural shocks."

This thesis consists of three self-contained chapters. Chapter I. The first chapter develops a dynamic general equilibrium model which includes financial intermediation and endogenous financial crises. Consistent with the data, financial crises occur out of prolonged (credit) boom periods and are initiated by a moderate adverse shock. The mechanism which gives rise to boom-bust episodes around financial crises is based on an interaction between the maturity mismatch of the financial sector and an agency problem which results in procyclical lending. I show how to model these features in a tractable way, giving a realistic representation of the financial sector's balance sheet and its lending behavior. The chapter provides empirical evidence on the behavior of the U.S. financial sector's market leverage which is (i) acyclical, (ii) rose mildly prior to the Great Recession, and (iii) increased sharply during the crisis; the model is consistent with these empirical facts. It also predicts and replicates the Great Recession, when confronted with a historical series of structural shocks. Finally, the framework is extended to include price rigidities, nominal debt contracts, and monetary policy. Within this version, I analyze the impact of monetary policy on financial stability and show that a U-shaped pattern of the policy target rate is most likely to increase financial instability. Chapter II. The second chapter models the economy as a time varying vector autoregression, consisting of economic and financial variables. The interest lies in the time varying response of these variables to a monetary policy shock. Monetary policy shocks are identified as the surprise component in policy announcements extracted from price changes in Federal Funds futures around such announcements. These monetary policy surprises enter the model as an exogenous variable. The framework is used to obtain evidence on the time varying response of stock prices to the monetary policy surprises. Stock prices always persistently decrease following a monetary tightening and more strongly than fundamentals imply - with an increase in risk-premia accounting for the difference. However, the response of stock prices varies over time. They decrease less during a boom and a perceived bubble period than during a recession. The findings suggest that so-called "leaning against the wind policies" may be ineffective since stock prices are less responsive during periods when such policies would disinflate asset bubbles using contractionary monetary policy. Chapter III. The third chapter augments a monetary dynamic general equilibrium model with a bubble as considered in [Miao_Wang_2015]. A bubble may exist in firms' stock market values and firms borrow against their inflated stock market values. Within this framework, I analyze the relation between monetary policy and the bubble. I find that contractionary monetary policy decreases the bubble which tightens borrowing constraints and amplifies the reaction of investment and output. These results are in contrast to the ones in Gali (2014) who considers a bubble of the classic rational type and finds that contractionary monetary policy can increase bubbles.

Thesis (Ph. D.)--University of California, San Diego, 2001. / Vita. Includes bibliographical references.

Thesis (Ph. D.)--University of Oregon, 2000. / Typescript. Includes vita and abstract. Includes bibliographical references (leaves 54-55). Also available for download via the World Wide Web; free to University of Oregon users.