Macroeconomics & International Finance Seminars

Spring 2017

Tuesday 1:403:00 p.m.
499 Engineering II

Ivalina Kalcheva, UC Riverside
"Make and Take Fees in the U.S. Equity Market"
Host: Eric Aldrich
ABSTRACT: We study the effect of liquidity-based trading fees charged by the U.S. stock exchanges, on market outcomes for the period 2008-2010. Our exchange-level analysis reveals that an exchange's trading volume is decreasing in its net fee, relative to the net fee of other exchanges. Further, an increase in the take fee decreases trading volume relatively more than an increase in the make fee. At the exchange level, these changes in trading volume are not accompanied by changes in quoted or net-of-fees spreads.

June 6
Bill Branch, UC Irvine
"Asset Prices, Unemployment and Monetary Policy when Households Lack Commitment"
Host: Hikaru Saijo
We study a Mortensen-Pissarides economy with a single twist: households who receive uninsurable idiosyncratic preference shocks, due to limited commitment, self-insure by accumulating claims on firms' profits.  The model can generate multiple steady states across which employment, the real interest rate, and market capitalization are positively correlated.  The model explains secular stagnation as a self fulfilling equilibrium where households are liquidity constrained, and both the real interest rate and the employment rate are low.  Under constant gain learning, the economy is recurrently drawn towards the secular stagnation equilibrium with the possibility of extended periods with low real interest and employment rates.  An extension of the model to include money and nominal bonds as assets implies the existence of a ``trap'' equilibrium where nominal interest rates are at an endogenous lower bound and the economy exhibits secular stagnation.  Learning dynamics imply that a financial sector shock, or a shock to beliefs, will generate endogenous escapes to the trap equilibrium.