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Title: One essay on time-inconsistent preferences and competitive equilibrium and two essays on optimal monetary policy
Author: Kokonas, Nikolaos
ISNI:       0000 0004 2749 4821
Awarding Body: University of Warwick
Current Institution: University of Warwick
Date of Award: 2013
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The first part of the thesis investigates the characterization of asset prices and investor's behavior under time-inconsistent preferences. For the latter type of preferences, we assume myopia or hyperbolic-discounting (HD). We consider an infinite horizon economy under certainty with two heterogeneous CRRA individuals, one good and one long-lived asset. The question of survival in the market arises when individuals are HD maximizers or myopic with wrong expectations about equilibrium asset prices. We provide sufficient conditions such that more myopic individuals dominate over less myopic ones and also sophisticated HD maximizers with intertemporal elasticity of substitution (IES) equal to one, log-utilities, dominate over HD maximizers with IES higher than one. Thus, individuals that vanish in the long-run will not have an impact on asset prices. On the other hand, asset prices are characterized by extreme dynamics if the economy is populated by myopic individuals only, who have perfect foresight about equilibrium asset prices. We show that even though the dividends of the long-lived asset are constant over time, there exist asset price dynamics that resemble an ever-expanding asset price bubble. The second part of the thesis investigates the characterization of optimal monetary policy under two different scenaria. In the first scenario we consider a two-period monetary economy with inside and outside money and an environment with fix prices and excess capacities in equilibrium. If unemployment is of a keynesian nature, a Friedman rule argument characterizes optimal monetary policy whereas if unemployment is of a more classical nature, high real wages, optimal policy requires positive nominal rates. In the second scenario we consider an economy with idiosyncratic risk and credit frictions. Monetary policy provides missing insurance due to credit frictions through the distribution of non-contingent seignorage transfer across states.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: HB Economic Theory ; HG Finance