Browsing by Author "John Lapp, Committee Member"

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Banking Structure and The Effect of Monetary Policy on Bank Lending.
(2005-08-11) Termos, Ali A; John Seater, Committee Member; John Lapp, Committee Member; Matt Holt, Committee Member; Douglas K. Pearce, Committee Chair
This dissertation examines the role of bank structure on the effectiveness of monetary policy. Using time series data for U.S. banks, I examine the varying effect of monetary policy on bank lending for the period 1976-2003. It is found that as the banking industry gets more concentrated (through mergers and acquisitions), the effect of monetary policy transmission (through open market operations) is being mitigated. That was the result of the deregulation of the banking sector that took place in the first half of the 1990s which led to an unprecedented wave of consolidation in the banking sector. Then I investigate the lending channel evidence at the bank level. That is, how important is the cross-sectional differences in the way that banks with varying characteristics respond to policy shocks. Three bank characteristics are highlighted: bank size, liquidity and capitalization. It is found that large, more liquid, and well capitalized banks are more impervious to changes in monetary policy than other banks. Real estate loans, agriculture, commercial and industrial (C&I), and consumer loans are analyzed. The size of the bank is found to be most crucial for real estate lending, where small banks are much more sensitive to changes in the federal funds rate compared to large banks. The effect is comparatively less pronounced for C&I and consumer lending and largely disappears when it comes to agriculture lending. Finally, the question of monetary policy asymmetry is examined. As expected, monetary policy has more effect on bank lending when it tightens than when it eases interest rates. This is found to be the case for all types of loans except for real estate loans, where a decline of FFR entices more real estate lending than a rise.
An empirical investigation of lending to small businesses
(2008-11-07) Min, Kyung-Seol; Lee Craig, Committee Member; John Lapp, Committee Member; Douglas Pearce, Committee Chair; Karlyn Mitchell, Committee Co-Chair
ABSTRACT MIN, KYUNG-SEOL, An Empirical Investigation of Lending to Small Businesses. (Under the direction of Douglas K. Pearce and Karlyn Mitchell.) This dissertation analyzes lenders' two important decisions (loan approval decision and loan rate decision) in their loan evaluation procedures using the SSBF (Survey of Small Business Finances) data sets. First, I examine what factors play important roles in the determination of loan interest rates. In this test procedure, following Vickery (2007), I split the data sets into fixed-rate and variable-rate loans to find systematic differences in the loan rate determination between these two loan types. The regression results of the loan rate model are different from general expectations in many respects. Not many independent variables have significant coefficient estimates. There is little consistency among the three regression results (2003, 1998, and 1993 SSBF data sets) both in fixed-rate and in variable-rate loans. Wide use of credit scoring is analyzed to be one explanation of the disappointing results. Lenders evaluate the credit risk of loan applicants with their own credit scoring system, and they mainly use the credit scores in deciding whether to approve the loan, and for the approved loans, the loan rates do not vary much according to their credit scores. Next, the test results of the credit rationing theory by Stiglitz and Weiss (1981) show that in the higher market interest rate period lenders' credit standards get also higher, so they ration credit more than in the lower market interest rate period. Finally, in the analysis of ethnic discrimination, Asians and Hispanics were less discriminated against in 2003 than in 1998, but African-Americans still higher loan denial rate than white applicants. The enhanced objectivity in lenders' loan evaluation procedures by using the credit scoring models might be associated with the decreased ethnic discrimination, but more collection of the SSBF data sets and analyses using these data sets are needed to support this explanation.
Essays on Factor Shares, Development Accounting, and Factor-Eliminating Technical Change.
(2010-06-25) Sturgill, Bradley; John Seater, Committee Chair; Asli Leblebicioglu, Committee Member; Pietro Peretto, Committee Member; John Lapp, Committee Member
Evaluating the Rationality of The Wall Street Journal's Panel of Economists
(2003-12-17) Houck, Adam Christopher; Douglas Pearce, Committee Chair; John Lapp, Committee Member; John Monahan, Committee Member
This paper will explore a methodology that will examine the difference between average and individual forecasts, concentrating on whether individual Wall Street Journal forecasters are unbiased and efficient. This result is important because the past literature has examined the accuracy of average forecasts, not individuals. In addition, a brief evaluation of Lamont's (2002) hypothesis will follow. Lamont determined that as forecasters become older and more established, in many instances deviations from the consensus forecast grew with time. The method adopted will allow for the testing of whether individual forecasts are unbiased and rational, telling more about how individuals, not averages, behave in broader contexts.
Non-Linear Aspects of Capital Market Integration
(2003-09-30) Mancuso, Anthony Joseph; John Lapp, Committee Member; Matt Holt, Committee Member; Daniel Hallstrom, Committee Member; Thomas Grennes, Committee Chair
According to classic economic theory, if global capital markets are fully integrated then arbitrage should force real interests rates to be equal among countries. However, a large body of empirical evidence suggests that this parity is not achieved. One potential factor in this failure of economic theory is that international capital transactions are not frictionless. The costs involved in the purchase or sale of a capital asset imply a neutral area in which arbitrage is not profitable and rates freely deviate from equality. This paper uses a variety of econometric methods to investigate the behavioral characteristics of real interest rates and determine the existence and form of transactions costs. This work is divided into six sections. Section One introduces the concept of capital market integration and details the current state of the literature on the topic. Section Two describes the data used in the analyses. Section Three uses a non-parametric regression method to analyze bilateral real interest rate relationships. Section Four examines these relationships in a multivariate setting, employing a method which incorporates non-linear behavior. Section Five investigates the data for structural instability. Section Six briefly summarizes and concludes the paper.
Sovereign Risk and Macroeconomic Fluctuations
(2004-12-01) Hamann, Franz; Paul Fackler, Committee Co-Chair; Areendam Chanda, Committee Member; John Seater, Committee Chair; John Lapp, Committee Member
This dissertation investigates the properties of macroeconomic fluctuations in a small open economy under the presence of sovereign default risk. International borrowing and lending arise from the interaction between a risk averse sovereign representative agent in a small open economy trying to self insure against idiosyncratic shocks and risk neutral international lenders. The credit market is imperfect because the country cannot commit to repay its outstanding debt and chooses to default when it is optimal to do so. The possibility of default induces an endogenous sovereign risk premium on foreign debt and endogenous rationing by foreign creditors. The second chapter presents a simple model of sovereign risk that explains how default can de triggered by shocks that drive normal business cycles, albeit in the context of an endowment economy. The model features incomplete external financial markets and the inability of the sovereign country to commit to repay debts. These two features coupled with risk neutral international lenders generate an endogenous risk premium and an endogenous borrowing constraint that drive the dynamics of default. The model is calibrated to the Argentine economy. It is able to reproduce counter-cyclical country risk spreads, large capital outflows during Sudden Stops, and default. In a simple experiment conducted here, it is shown that by increasing trade sanctions to the artificial economy, it is possible to deter default but it is not possible to isolate the economy from the occurrence of Sudden Stops. Despite this, the welfare gains from eliminating default are very large: 7\% of steady state consumption. Using numerical methods, this paper also proposes an algorithm for the solution of this family of models that allows to generalize the results of Eaton and Gersovitz (1981) into environments with varying degrees of persistence and volatility in the underlying stochastic income process. In the third chapter the assumption of an endowment economy is relaxed and the welfare implications of default are studied. Allowing for capital accumulation has a two implications on affecting incentives to repay. The first is that capital increases the likelihood of default because the country has an asset to save if defaults. The second is that, as markets are incomplete and the country engages in precautionary savings, capital serves as a buffer to mitigate consumption falls during recessions. The model is calibrated to the Argentine economy and reproduces the main macroeconomic volatilities and correlations as consumption, investment and output, but fails to reproduce those of trade balance, current account and interest rates. Further research is needed in this direction. The fourth chapter focuses on monetary policy in small open economies. It presents a dynamic stochastic general equilibrium model of inflation targeting in a small open economy. The model is calibrated to the Colombian economy to study the response of some macroeconomic variables to different types of shocks that are relevant for emerging economies. The sensitivity of those responses to some key parameters is also analyzed. Furthermore, using simulated data from the model, the ability of the model to capture the spectra, the phase and the coherence of observed output and inflation are studied.
Uncertainty and Business Cycles Asymmetries
(2005-07-08) Sepulveda Umanzor, Jean Paul; John Lapp, Committee Member; Douglas K. Pearce, Committee Member; Matthew Holt, Committee Member; John J. Seater, Committee Chair
In this dissertation I investigate how macroeconomic uncertainty behaves during the business cycle, and then I present a model that can reproduce what I find in the data. I first present evidence, from surveys of expectations, that indicates that macroeconomic uncertainty is higher during expected slowdowns than during expected expansions in real GDP. I then, try to explain this theoretically. To do that, I show that the standard stochastic growth model can be expanded to include an endogenous depreciation rate, allowing it to deliver the findings previously discussed. The model generates asymmetric output fluctuations in response to symmetric productivity shocks. Business cycle asymmetries then reproduce the pattern of uncertainty described in the empirical chapter.