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Title: Three essays on a financial crisis : a New Keynesian DSGE approach with financial frictions
Author: Keah, Kanghoon
ISNI:       0000 0004 5348 8820
Awarding Body: University of York
Current Institution: University of York
Date of Award: 2014
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This thesis aims at enhancing our understanding of a financial crisis by using New Keynesian frameworks with financial frictions and applying Bayesian methods to the dynamic stochastic general equilibrium (DSGE) models. First, we use a Gertler and Karadi (2011) type closed economy DSGE model to investigate a source and the transmission mechanism of a financial crisis. We show that a collapse in borrowers' net worth could lead to a real contraction by limiting the the bankers' credit supply to non-financial firms. In addition, our simulation indicates that the central bank's credit market intervention could be an effective tool in alleviating the financial crisis by restoring the private financial intermediation. Second, we simulate a sudden stop crisis in an emerging market economy by using a small open economy DSGE model with financial frictions. We show that foreign lenders' negative perception on an emerging market economy could actually lead to a recession via sudden stops in foreign capital inflow and the rise in cost of foreign borrowing. In addition, we establish that a sudden stop crisis could be aggravated by (i) the substantial degree of financial frictions in the economy, (ii) the heavy reliance on foreign resources in capital production, (iii) the choice of a fixed exchange rate regime, and so on. Finally, we estimate the above small open economy DSGE model by using the data from South Korea and the US. We obtain sizable and significant estimates for key parameters in the model, which support the theoretical arguments above empirically.
Supervisor: Ozkan, Gulcin Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available