Essays on macro-financial linkages.

Summary The main theme of this thesis is macro financial linkages. I have covered three different issues related to this topic. In the first chapter, Gaël Giraud and I develop a model for the euro area in response to many criticisms of policy models prior to the GFC and with a focus on the interaction between the financial sector and the macroeconomy. The second and third chapters focus on the behavior of the financial sector in the wake of the global financial crisis and its implications for the macroeconomy. Chapter 2 examines the practice of forbearance for distressed borrowers. The ultimate question in this chapter is the extent to which this behavior affects the real economy. Finally, the third chapter highlights an episode of manipulation in commodity markets. This alleged manipulation was apparently only possible because of the dominant market position of banks in the run-up to the crisis and afterwards. Ultimately, I quantify the effects of such behavior and provide evidence of a structural change in the manipulated market during the period of alleged manipulation. The first chapter exploits a bank-level dataset, while in Chapters 2 and 3 I develop structural macro models. In particular, the dynamic system model in the second chapter is an innovation. This class of models, and especially a model of the size we develop, has never been estimated and subsequently used for policy analysis.