ESSAYS ON THE REAL EFFECTS OF INFORMATIONAL FRICTIONS IN FINANCIAL MARKETS

Abstract

This dissertation aims at characterizing the real consequences of informational frictions in financial markets through several applications. The first chapter highlights a dynamic feedback loop in learning that arises between financial markets and real investment that helps explain how financial crises can contribute to slow recoveries. The second chapter investigates feedback effects from learning in commodity markets to understand the role of financial market speculation in the commodity boom and bust cycles of the late 2000’s. The third chapter explores the role of informational frictions in housing markets to rationalize the hump-shaped pattern in price volatility observed across supply elasticity in the recent US housing cycle.