This item is only available for download by members of the University of Illinois community. Students, faculty, and staff at the U of I may log in with your NetID and password to view the item. If you are trying to access an Illinois-restricted dissertation or thesis, you can request a copy through your library's Inter-Library Loan office or purchase a copy directly from ProQuest.
Permalink
https://hdl.handle.net/2142/85560
Description
Title
Essays in Banking and Interest Rates
Author(s)
Xie, Lili
Issue Date
2005
Doctoral Committee Chair(s)
Charles Kahn
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Finance
Language
eng
Abstract
This dissertation includes three papers on banking and interest rates. The first paper presents a theoretical model that studies the effect of universal banking on economic performance. I show that universal banks, because of their ability to extend the horizons of their relationships with borrowing firms, are more willing than are specialized commercial banks to insure firms against the financing risks associated with innovation. However, universal banks' leniency towards firms discovered to be bad credit offsets their advantages in encouraging innovation. Comparative statics investigations suggest that when information asymmetry in an economy is severe, the advantages of universal banks become more important, while when firms become larger, the advantages of specialized commercial banks become larger. The second paper provides empirical support for the theoretical predictions in the first paper. I find that small firms in countries with universal banking systems grow significantly faster than small firms in countries with specialized banking systems while no significant difference is found for large firms. In addition, the positive effect of universal banking on firm growth seems to be even more obvious in developing countries. The third paper studies whether three popular macroeconomic models can generate the behavior of nominal and real term structure found in data. Different from King and Watson (1996), it uses data on UK index-linked bonds to get a better measure of ex-ante real interest rates. It is found that all three models are able to generate the downward sloping real term structure, the procyclical 1-year nominal rate and the countercyclical nominal yield spread. However, only the sticky price model and the liquidity effects model are able to generate the counter-cyclical behavior of 1-year real rate and the pro-cyclical behavior of real yield spread. Finally, only the sticky price model is able to generate the upward-sloping average term structure of nominal interest rates for maturities between 2 and 6 years.
Use this login method if you
don't
have an
@illinois.edu
email address.
(Oops, I do have one)
IDEALS migrated to a new platform on June 23, 2022. If you created
your account prior to this date, you will have to reset your password
using the forgot-password link below.
