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Princeton Community
April 25, 2023
12:15 pm - 1:15 pm
12:15 pm - 1:15 pm
Narek Alexanian on Outside and Inside Money Revisited and Yinan Qiu on Do international equity funds benefit from managers' foreign education backgrounds
Narek Alexanian Abstract:
Cash (outside money) or credit (inside money) can be used as a medium of exchange to settle transactions. But does their coexistence help or hamper allocative efficiency? I examine this question in a model in which credit is collateralized by cash due to limited commitment. I show that the introduction of credit is welfare improving if and only if limited commitment constraints are sufficiently loose and agents coordinate on choosing credit to mediate exchange. In this environment, credit is optimally chosen to be a nominal contract between borrowers and lenders. Hence, the model delivers a joint characterization of money as (a) store of value; (b) medium of exchange and (c) unit of account.
Yinan Qiu Abstract:
In this paper, we study whether US international equity funds perform better in their managers' education countries. We find that while funds hold 16.7% higher excess shares in the country of their current manager's education, the sub-portfolios in those education countries do not have better performances. We also use the active share measure (I-measure) to infer funds’ subjective information rankings of each equity and sort the equities into different portfolios. The highest I-measure portfolio has the highest market alpha in both education and non-education countries, and the differences in alpha across different I-measure quantiles is more pronounced in education countries.
Narek Alexanian and Yinan Qiu
Student Research Workshop
Princeton Community
March 28, 2023
12:20 pm - 1:20 pm
12:20 pm - 1:20 pm
Joseph Abadi on Monetary Policy with Inelastic Asset Markets
I develop a New Keynesian model to study the transmission of both conventional and unconventional monetary policy through financial markets. Aggregate asset demand is inelastic due to the presence of (i) heterogeneous intermediaries whose asset demand curves are downwards-sloping, and (ii) households that face frictions in reallocating their savings across intermediaries. The central bank directly controls the short rate, whereas the price of risk is determined by the distribution of intermediaries’ wealth and the central bank’s asset holdings. Interest rate hikes reduce long-term risky asset values, redistributing wealth away from risk-tolerant intermediaries and increasing the risk premium. Central bank asset purchases can provide stimulus by reducing the risk premium, but asset prices and investment may undershoot when those purchases are unwound. Optimal policy achieves the first-best: interest rate policy closes the output gap, and balance sheet policy neutralizes the resulting fluctuations in the price of risk.
Joseph Abadi
Student Research Workshop
