Economics
College of Humanities and Social Sciences

Essays on Money, Banking, and Finance

Thomas L. Hogan

Major Professor: Dr. Lawrence H. White

Committee Members: Dr. Tyler Cowen, Dr. Gerald Hanweck, School of Management

Enterprise Hall, 318
April 26, 2011, 09:00 AM to 11:00 AM

Abstract:

This dissertation will address three significant topics in money, banking, and finance.  The first chapter contributes to the current debate over is Gresham's Law.  This "law" had long been considered a basic principle of monetary economics, yet over the last few decades it has become commonly criticized as a failure.  I clarify the theory of Gresham's Law as a description of price controls on the exchange of currencies and provide historical evidence of the influence of Gresham's Law on English coinage from 1344 to 1815. 

The second chapter presents a generalized version of the Diamond-Dybvig model.  The recent literature on bank runs, following Diamond and Dybvig (1983), studies the banking sector in isolation from the greater economy. Here I model an economy that includes not only DD type bank depositors but also producers of goods. When consumers can exchange goods for deposits, trade provides a welfare improvement, and bank runs are not an equilibrium unless the bank is fundamentally insolvent. 

The final chapter examines the influences of financial leverage and risk-based capital on the stock and bond prices of US bank holding companies from 2000 to 2010.  Leverage and capital are both found to be correlated with stock price volatility and bond yield spreads. These correlations occur in different periods indicating that leverage and capital are important but different indicators of risk.

Print Friendly and PDF