This dissertation consists of three essays on monetary economics. The first two essays have a focus on the zero lower bound on the nominal interest rate (ZLB) and the Great Recession. In the first essay, I investigate optimal discretionary monetary policy under the ZLB in the case of a distorted steady state due to monopoly and taxation. I find that the central bank in a more distorted economy would cut the interest rate less aggressively under a particular adverse demand shock. This occurs because the ZLB is less likely to bind and the economy escapes from the ZLB sooner. In addition, I show that the conventional linear-quadratic method is not accurate when the ZLB binds. In the second essay, I model the role of subprime lending, deleveraging and an incomplete financial market in driving an economy to the liquidity trap with binding ZLB. There are two key features that differentiate my work from the current literature of deleveraging and the ZLB. First, I endogenize the debt limit of borrowing-constrained households by tying it to the market value of collateral assets. Second and more importantly, I allow for subprime lending. I am able to show that the second feature drives the economy to the ZLB more likely under an adverse shock to the credit market. When the ZLB binds, a great recession emerges with a free fall in output and the price level, mostly due to the Fisherian debt deflation that puts more debt burden on the borrowers. The third essay examines the role of habit formation in solving the persistence problem - output response is transient and not hump-shaped under a monetary shock - in the conventional state dependent pricing model. Intuitively, incorporating habit formation makes consumers less aggressive in spending under a shock, resulting in more persistent response of output. With a moderate habit formation, I am able to show that the model produces hump-shaped and very persistent response of output under a monetary growth shock.

Credit granting is not only one core business but also the major profit source of banks. Non-Performing Loan Ratio (NPL Ratio) is an important index to evaluate the quality of credit granting and to influence profitability of banks. Recently, NPL ratio, which soared to record level, of local banks does not only hurt their asset quality but also threaten their surviving space due to the changes of internal structure, overbanking, internationalization of local banking industry, economic recession, the subprime crisis in 2007. Theoretically, banks have their own credit granting policy and credit examination system; however, there is soaring NPL ratio to cause huge NPL losses in banks because of the differences of credit grating practices. Nevertheless, there are some local banks which have lower NPL ratio. Therefore, this research is to help us to understand the possible factors of overdue loan that happened in corporate banking, and try to discover the key factors. Also, try to sampling those key factors from the past experiences for future crediting reference. The main profit from a bank is the margin of deposit and credit loan interest. Therefore, the overdue loan is highly related to a bank¡¦s profit. Moreover, it is necessary for banks to pay more cost to make up the losses which are caused by the NPL. Certainly, it is safest way for banks to acquire 100% collaterals for creditors¡¦ right, although 100% collaterals could be acquired, the creditors cannot ignore the impacts (on the creditors¡¦ profitability) of the necessary litigation expenses for disposing the collaterals. As a result, fully recognize the customers¡¦ credit condition before drawing is the only way to avoid the NPL loss and ensure the profit.

The subprime mortgage lending practices from 1995 to 2007 were disproportionately concentrated on minority and low income neighborhoods of the United States. Despite the negative effects of subprime loans, these loans are regaining popularity. The purpose of this phenomenological research study was to bridge the gap in knowledge about their effect on African American women by exploring the home buying knowledge and behaviors of African American women between 2004 and 2007 in a southern state. Ajzen and Fishbein's theory of planned behavior served as the theoretical framework of this study, which explored factors that motivated African American women to buy a home, how the type of subprime loan used was identified, their knowledge of subprime loans, their experience of buying a home, and their postpurchase experience of becoming a homeowner. Data were collected through a demographic questionnaire and semistructured interviews with a snowball sample of 20 participants. Data were analyzed using the phenomenological method of thematic coding. Findings indicated that participants believed they were taken advantage of by realtors and loan servicers, were mostly unaware about the type of subprime loan used to purchase their homes, and later found out about the problems with subprime loans after conducting their own research. The implications for positive social change are directed at policymakers to focus attention and resources on understanding and addressing the experiences of African American women by expanding access to prime lending markets, better regulating subprime lending terms more effectively, and empowering African American women to be knowledgeable and vigilant about the drawbacks of subprime mortgages.