Essays in financial economics

Thesis

This thesis studies three sources of risk in financial markets that share a common feature: each arises from policies designed to alleviate one problem but, as this thesis shows, carrying adverse externalities for financial markets further down the line. Chapter 1 studies the effect that fiscal expansion in a safe-haven country has on the government bond universe of other countries. Using a proxy-SVAR identified with German Bund futures, it finds that fiscal shocks raise the risk-free benchmark, widen peripheral spreads, and contract lending. Crucially, these materialise before actual fiscal spending occurs. Chapter 2 studies how post-crisis regulation designed to make financial markets more resilient is shaping haircuts in repo markets in ways not previously documented. It shows that binding leverage constraints distort bilateral haircuts, with consequences for financial stability and monetary policy pass-through. Lastly, Chapter 3 investigates how climate transition risk could potentially spill into liquidity risk for commercial banks. By studying these channels, the thesis contributes to the ongoing debate about how regulation and fiscal stimulus should be designed to maximise intended outcomes while minimising unintended consequences.

Authors: Knyphausen, J

• DOI: 10.5287/ora-vgdjq94jx
• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford
• Language: English