Wai-ming Ho

Date of Award


Degree Type


Degree Name

Doctor of Philosophy


This thesis consists of three essays in international finance and macroeconomics to study the link between money and economic activity.;The first essay, entitled "Liquidity, Exchange Rates, and Business Cycles," presents a two-country, two-good, two-currency model to study the role of liquidity effects in exchange rate determination and the international transmission of economic fluctuations. The monetary authority's injections of cash are funneled into the economy through financial markets. The asymmetry of economic agents' access to the newly injected cash induces liquidity effects. The model provides an exchange rate equation which is different from the simple purchasing-power-parity law of exchange rate determination. Both monetary injections and real disturbances can lead to exchange rate fluctuations and comovements of interest rates, prices and output of the two economies. Whether the covariances of variables in the two countries are positive, negative, or zero depends critically upon the substitutability of the two consumption goods in consumers' preferences.;The second essay, "Capital Controls, Foreign Exchange Controls, and Liquidity," continues the study of liquidity effects. By using a similar model to that constructed in the first essay, this essay analyses the liquidity effects generated by restrictions on international financial markets. Taxes on international financial transactions induce redistribution of liquidity in international financial markets which results in comovements of macroeconomic aggregates in the two economies, fluctuations in exchange rates and interest rates, and changes in welfare of economic agents of each country.;The third essay, "Imperfect Information, Money, and Economic Growth," presents an endogenous growth model with financial market imperfections to study the effects of money on economic growth, and to examine the role of informational imperfections in the determination of the equilibrium growth path. It is found that the economy will grow slower if there is imperfect information. Changes in money growth have qualitatively similar effects on the economies with and without private information. However, the economy with private information will be less responsive to monetary shocks. The results contradict the popular view that informational imperfections in credit markets or borrowing constraints tend to amplify the impacts of policy interventions.



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