In the first chapter of my Thesis I propose a model of front-running in noisy market environment. I demonstrate that even if the front-runner/predator has no initial knowledge about the position of a distressed trader he will be still able to front-run his orders in a linear Bayesian-Nash equilibrium. This is possible because initial orders of the distressed trader tend to reveal his initial position. The contribution of this chapter is also in the analysis of long-term dynamics of predatory trading under Gaussian uncertainty. Second chapter treats about the dark-pools of liquidity which are highly popular systems that allow participants to enter unpriced orders to buy or sell securities. These orders are crossed at a specified time at a price derived from another market. I present an equilibrium model of coexistence of dark-pools of liquidity and the dealer market. Dealer market provides the immediate execution, whereas the dark-pool of liquidity provides lower cost of trading. Risk-averse agents in equilibrium optimally choose between safe dealer market and cheaper dark-pool of liquidity. In the third chapter I solve for a partial-equilibrium optimal consumption and investment problem, when one of the investment assets is traded infrequently. Opportunity to trade the "illiquid asset" arises upon the occurrence of a Poisson event. Only when such event occurs a trader is able to change (increase or decrease) her position in the illiquid asset. The investor can consume continuously from the bank account. After deriving HJB equation, I analyze in details the implications of illiquidity on the optimal level of consumption, allocation and welfare. The optimal policy is solved using algorithm from aeronautics.

This thesis aims to examine the response of a behavioural finance model and a financial frictions model to the financial crisis which was triggered in 2007.This thesis will test both models by using indirect inference as an evaluation method.The results of this study show that,when compared with the rational expectation model, behavioural expectation does not improve the model's ability to explain the real world. Therefore, behavioural expectation is unable to respond to the current crisis to form expectations .However,the financial frictions model which is suggested by the literature is found to be an efficient model that improves the model's overall performance. This thesis finds that although financial shocks contribute to the out put gap variation during the crisis, it does not respond so much to the variations of inflation and policy. interest rate.

The central aim of this thesis is to examine the multiple dimensions of poverty, using the Multiple Indicator Cluster Surveys (MICS, 2008 and 2011) for the Punjab province of Pakistan. The thesis is based on three core chapters, with a focus on the measurement and determinants (particularly household size) of poverty. Chapter 3 calculates and analyses the multidimensional poverty index (MPI) developed by Alkire and Foster (2007) and the destitution measure (strict subset of the MPI), using health, education and standard of living dimensions for 2011. Chapter 4 extends the multidimensional poverty framework to a multi-period context by investigating the changes in the MPI and destitution measure from 2008 to 2011, and it contributes to the literature by assessing the impact of the severe 2010 floods on poverty. Applying probit and IV-probit methodologies on MICS 2008 data, Chapter 5 examines the complex and largely unexplored relationship between household size and poverty (income, child health and education), and highlights other important poverty determinants. The key results for 2011 illustrate that rural South Punjab experienced considerably greater deprivation than the urban North, that almost half of the MPI poor households were also destitute, and that the ‘years of schooling’ indicator was the highest contributor to both MPI and destitution, reflecting the dire state of education in Punjab. The intertemporal results indicate that the MPI increased from 2008 to 2011, with an intensification of poverty for rural households, especially in the flood-affected zones. Providing a micro lens for viewing deprivation, the destitution results showed that households in many districts and towns graduated into the less extreme form of multidimensional poverty. The econometric results of Chapter 5 show that larger households experienced lesser income and education poverty when endogeneity was controlled for, but household size was not a significant determinant of child health deprivation. No clear causal link could be established among the different poverty dimensions and household size. The results of this thesis paint a comprehensive and dynamic regional picture of the various dimensions of poverty in Punjab, providing policymakers insights for formulating targeted poverty reduction strategies.

The thesis looks through the lens of bank balance sheet accounting to investigate the structural change in the British banking system between 1780 and 1832, and how classical quantity theorists of money attempted to respond to the ensuing financialisation of the wartime economy with its growing reliance on credit funded with paper-based instruments (the ‘Vansittart system’ of war finance). The thesis combines contributions to three separate fields to construct a holistic historical example of the challenges faced by monetary economists when ‘modelling’ financial innovation, credit growth, ‘fringe’ banking, and agent incentives – at a time of radical experimentation: the suspension of the 80-year-old gold standard (“the Restriction”). First, critical text analysis of the history of economics argues that the 1809-10 debate between Ricardo and Bosanquet at the peak of the credit boom, bifurcated classical theory into two timeless competing policy paradigms advocating the ‘Scarcity’ or ‘Abundance’ of money relative to exchange transactions. The competing hypotheses regarding the role of money and credit are identified and the rest of the thesis examines the archival evidence for each. Second, the core of the thesis contributes to the historical literature on banking in relation to money by reconstructing a taxonomy of bank business models, their relationships with the London inter-bank settlement system, and their responses to the Restriction - drawing on some 17,000 mostly new data points collected from the financial records of London and Country banks. The final section contributes to the economic history of money by constructing aggregated views of total bank liabilities from the firm-level data, scaled to recently available British GDP estimates. These are examined to establish (with hindsight) the relative merits and lacuna of the competing theoretical hypotheses postulated by political economists. It was the period of deleveraging after 1810 that revealed the lacuna of both paradigms.

The wage data that economic historians rely on for calculating key economic indicators and living standards across Europe are all derived from records of building craftsmen and labourers’ pay. Existing series suggest wages in London were substantially higher than in other European centres from 1650 to 1800, and current accepted theories ascribe Britain’s early industrialisation to the products and incentives of this wage structure. But the period after the Restoration was one of prodigious building in London, and of organisational change in the construction trades. This thesis examines the contractual and organisational context in which building craftsmen and labourers operated and shows that the nature of the ‘day rates’ used to construct wage series in London and England has been misunderstood. As a result, wages and real wages have been overstated for England throughout the long eighteenth century.

The establishment of a fully fledged central bank in Greece between May 1927 and May 1928 was a prerequisite for the country’s stabilisation programme prepared by the FinancialCommittee of the League of Nations. Prior to 1928, the National Bank of Greece had acted as a central bank whilst at the same time being by far the biggest and most powerful commercial bank in the country. Under pressure from the League, its governors faced the challenge of transforming it into a fully fledged central bank by shedding all business that was in the province of deposit and commercial banking. They chose instead for the Bank to retain its commercial activities and instead a new fully fledged central bank was established. This thesis explores both the central banking and commercial aspects of the National Bank from the enactment of the Law of Control in 1898 until de jure stabilisation in 1928. It addresses the following questions: why was the National Bank not in a position to transform itself into a fully fledged central bank on its own initiative following a path similar to that described by the natural evolution hypothesis? Why were the commercial activities of the National Bank so important that in the end it chose to retain that aspect of its business when prior to 1927 it had so fiercely guarded its central banking privileges? It is argued that it was the way in which the governors of the National Bank combined central banking responsibilities with commercial banking that safeguarded and preserved the financial strength and consequently the reputation of the Bank throughout its entire history as a bank of issue. The financial position of the dual-purpose Bank was also protected by the conservative and risk-averse way in which it pursued its commercial activities. The National Bank’s financial strength was based on its market power and its ability to select high quality assets and liabilities which resulted in its enduring profitability and solvency. The quality of its assets and liabilities was more important for its governors than maximisation of profits per se. The way that central banking reforms were implemented is also studied. The objectives and functions of the new central bank are evaluated as well as its financial position when it first opened its doors for business. It is maintained that the statutes of the Bank of Greece were at the heart of the central banking principles promoted by the Bank of England and were focused on the macro function of a central bank and on its role as the bank of the government. This thesis also sheds light on the complex relationship that arose between Greek governments and foreign supervisors between the enactment of the Law of Control in 1898 and stabilisation in 1928. Furthermore, it asks questions about the conditionality attached to bailout loans in the late nineteenth century and in the 1920s. The impact that international financial intervention had on monetary reforms is clearly demonstrated. It is argued that monetary developments in Greece between 1898 and 1928 reflect the political economy of the time as well as the historical circumstances. Monetary reforms were shaped by the objectives of the National Bank and the constraints under which it operated rather than foreign control. These findings provide valuable insights into why Greek governments have unsuccessfully struggled to implement widespread structural reforms demanded by their lenders since 2010 and as a consequence the country has experienced a deep and protracted economic recession.

This dissertation revisits Brazil's experience with multiple exchange rates (MERs) between 1953 and 1961. Exchange controls such as MERs were common across the world during the early days of the Bretton Woods arrangement, despite the resistance from the International Monetary Fund (IMF), which assumed they caused instability and balance of payments crises. Latin America’s use of exchange controls was widespread, with different exchange rates also adopted as instruments to stimulate import substitution industrialization (ISI). Brazil’s MER system was, however, a unique experiment, with all the country’s imports included in a regime of auctions of foreign exchange, resulting in a controlled depreciation process with different sectoral exchange rates. The experience had two phases, the first of which diverged from other cases in the region in lasting much longer, maintaining stable macroeconomic conditions, and avoiding IMF interventions. The second phase resulted in a decline of the system's macroeconomic effectiveness and its eventual collapse in 1961. This research investigates the peak and decline of Brazil’s MER systems by analyzing a new quantitative dataset that is further complemented by qualitative sources. The main thesis is that Brazil’s MER regime was a ‘successful’ experience during its first phase, with a singular design that supported the stabilization of macroeconomic conditions. Officials were ‘guiding the invisible hand’ of the market to help balance macroeconomic variables. The dissertation also shows that the MER system was not a protectionist instrument to stimulate import substitution in advanced sectors and did not generate distortions to sectoral industrial growth. It was, however, transformed during its second phase into a mechanism to subsidize private sector imports and increase the government’s direct participation in the industrial effort, which was an industrial deepening process with costly macroeconomic consequences.

This thesis is about innovation and economic growth in less developed territories. It is motivated by the inadequacy of our understanding of innovation in lagging contexts. It is situated in the body of literature that examines and stresses the contextually contingent nature of innovation. It does, however, branch out to probe the link between innovation and economic performance and contemplate the design of strategic approaches to promote the latter. It is composed of an introduction, four related chapters and a short conclusion. Chapter 1 relies on an investigation of a large sample of North American and European regions to assess whether all less developed regions are, from an innovation perspective, functionally the same. In particular, it addresses the issue of what makes the less developed regions of North America more innovative than their European counterparts. Chapter 2 expands the scope of the thesis to include the emerging world. It unpacks the processes of innovation hosted by China’s more and less developed cities, respectively, with a view to identify and understand the differences between the sets of factors that drive and shape processes of innovation in them. Chapter 3 examines the relationship between innovation and economic performance in less developed regions. A comparison of two types of lagging regions in Europe is undertaken to explore the extent to which different types of economically disadvantaged regions are capable of transforming knowledge and innovation into economic dynamism, given their unique socioeconomic and institutional characteristics. Chapter 4 reflects on the strategic approaches that have been relied on to promote innovation and economic growth more generally. It reviews a handful of ‘strategies of waste’ and ‘of gain’ to ascertain insights into the steps policy-makers can take to maximise the likelihood that territorial development policies fulfil their potential and contribute to the reduction of territorial disparities.

This PhD thesis analyses the spatial dimension of economic development in 19th century France and Belgium. During the 19th century Western European economies underwent a socio-economic and technological transformation to sustained rates of economic growth. The integration of domestic and foreign markets driven by declining transport costs and the reduction of trade barriers, shaped the economic geography of Western Europe. Consisting of three articles, this PhD thesis provides detailed empirical analyses of the spatial effects of trade liberalisation, technological change as well as the relative importance of market access and factor endowments. The first article studies the spatial effects of the Cobden-Chevalier treaty of 1860 which lifted all import prohibitions on British manufacturers, exposing French producers to intensified British competition. The results show that increased British competition has led to a shift in the spatial distribution of French production and employment. Regions located closer to Britain lost employment and output shares in industries which experienced a rising importance of British imports. The second article analyses the interrelatedness between the diffusion of power technologies and urbanisation. I ask the research question whether French adherence to water power, and slow diffusion of steam technologies, was associated with low urbanisation, limited gains from urban agglomeration and through this mechanism constrained economic development. I find that steam-powered firms were around twice as likely to be located in urban regions while water-powered firms were highly associated with rural municipalities. Moreover, urban firms paid higher wages and were more productive than their rural counterparts. The third article studies the importance of access to coal and markets to explain regional patterns of Belgian industrialisation. The analysis shows that both access to coal and markets played important roles, suggesting that supply and demand factors should be seen as necessary rather than sufficient conditions of 19th century industrialisation.

This thesis contains three essays on behavioral responses to social insurance and taxation. The first chapter documents and analyzes an important and puzzling stylized fact about retirement behavior: the large concentration of job exits at specific ages. In Germany, almost 30% of workers retire precisely in the month when they reach one of three “statutory” retirement ages, although there is often no incentive or even a disincentive to retire at these thresholds. To study what can explain the concentration of retirements around statutory ages, I use novel administrative data covering the universe of German retirees, and I take advantage of unique variation in retirement incentives as well as in the location of statutory ages across individuals created by the German pension system. Measuring retirement bunching responses to 644 different discontinuities in pension benefit profiles, I first document that financial incentives alone fail to explain retirement patterns in the data. Second, I show that there is a direct effect of “presenting” a threshold as a statutory age, which is substantially larger than that of financial incentives. Further evidence on mechanisms suggests the framing of statutory ages as reference points for retirement as an explanation. A number of alternative channels including firm responses are also discussed but they do not seem to drive the results. The second chapter analyzes bunching responses around reference points and argues that bunching methods are naturally suited to quantify reference-dependent preferences. Using a standard labor supply model, the workhorse of the bunching literature, I first show that different types of reference dependence all have a key prediction in common: They imply sharp bunching of the outcome at the reference point. Observed bunching can be linked to underlying parameters, which motivates both structural and reduced-form estimation methods to implement an empirical bunching approach to reference dependence. Finally, I present two applications in the context of retirement decisions. First, I find significant bunching responses at a type of “pure” reference point, namely round retirement ages. Second, I complement the analysis from chapter 1 with structural estimation and find a quantitatively important role of reference dependence at statutory retirement ages. Counterfactual simulations highlight that shifting statutory ages via pension reforms can be an effective policy to increase actual retirement ages with a positive fiscal impact. The third chapter turns to a topic from the realm of taxation. Modern systems of firm taxation typically feature a combination of payroll, valued-added, and corporate income taxes. However, they often exist alongside special presumptive tax regimes targeted at small and medium enterprises (SME), such as a single turnover tax. This chapter uses novel administrative data from S ̃ao Paulo (Brazil), including data on inter-firm trade, to shed light on the effects of such dual tax systems on firm growth, market competition, and production decisions. First, we show that the firm size distribution is distorted by the eligibility threshold for the presumptive tax system. Second, ineligible (larger) firms are adversely affected by reductions in the tax and compliance burden for SME. Third, we study the relationship between tax systems and production choices. The presumptive tax mainly replaces a payroll tax and a value-added tax by a turnover tax in our context. Accordingly, we find that firms in the presumptive tax regime use relatively more labor input and source more of their intermediate input from other firms in the same regime. This leads to partial segmentation of the trade network between firms in the two systems. We show that heterogeneity in firm production choices drives part of these correlations, but there is also a causal effect of tax regimes on input choices.