Financial Deregulation and the Great Moderation
Cubbage, Elizabeth Ellen, Department of Economics, University of Virginia
Otrok, Christopher M., Department of Economics, University of Virginia
Young, Eric, Department of Economics, University of Virginia
I investigate the effects of financial deregulation on the volatility of macroeconomic variables. First, I develop a model of small business borrowing that explicitly incorporates borrowing costs. I embed the optimal small business borrowing contract model into a Dynamic Stochastic General Equilibrium model. I find that the borrowing costs are significant to the macroeconomy in my model, and that the pattern of borrowing costs changes over time. I obtain first and second order accurate parameter estimates, and conclude that the second order is significant to the model dynamics and parameter estimates.
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PHD (Doctor of Philosophy)
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