UC Santa Cruz

Chapter 1:

Inspired by the political events that followed after the sovereign debt crisis in Greece post 2009, I develop an overlapping generations model with aggregate and idiosyncratic shocks to analyze agent's decisions if each had a vote in whether the country should default or not. The hypothetical economy where agents vote to default almost became a reality in 2015 when Prime Minister of Greece asked the voting population whether the country should remain in the bailout program through a referendum. Model results exhibit similar patterns as the Greek referendum with the young and less wealthy more inclined to vote for default.

Chapter 2:

We develop a theoretical model to highlight a previously

unexplored mechanism of price discovery: relative minimum price

increments for equivalent assets trading on distinct financial

exchanges. Although conventional wisdom dictates that futures

market assets lead equities equivalents in terms of price

formation, our model predicts that the opposite should be true

when particular relative price conditions hold for the bids and

offers of each asset. We develop a new empirical measure of price

discovery which is suited to asynchronous, high-frequency

transaction and quotation data, and apply it to the highly liquid

E-mini/SPY pair in order to test the predictions of the

model. Empirical evidence strongly supports the model and further

demonstrates that relative minimum contract size plays an

additional role in the formation of prices.

Chapter 3:

United States population has increasingly become older. The aging is expected to continue as life expectancy increases, more baby boomers reach retirement age and birth rate declines. These demographic changes have had significant impact on the solvency of the Social Security Trust Fund. Social Security Administration projects the fund's insolvency around 2035. Given the imminent insolvency, policies such as increasing eligibility age and expanding the tax base have been proposed. These policies are usually analyzed using many period OLG model with a hump-shaped age-dependent productivity profile. We believe this profile is dynamic as the population itself. We incorporate the dynamic age-dependent profile in an OLG framework in a closer look at insolvency of the Social Security Trust Fund.