Date of Award
Jan Kregel, Ph.D.
The focus of this thesis will be on three main components, namely, monetary transmission mechanisms, financial innovation and portfolio hedging. It will first discuss the different channels of monetary policy and how they affect economic and financial variables. Then, financial innovation will be analyzed from the perspective of Hyman P. Minsky and the effects on the financial system. Next, the relation of regulation to the changing financial landscape of the economy will be discussed. Finally, the use of financial derivatives will be reviewed, presenting their hedging function and speculative risks. Then, the impact of too big to fail banks and their inability to effectively hedge systemic risk will be discussed. A peculiar example, known as the JPMorgan London Whale Scandal, will illustrate the influence of too big to fail banks on their hedging activities and the repercussions for policy and future reform. Then, the difficulties these banks face in performing a macro hedge will be examined. Ultimately, financial innovation and too big to fail banks impede the influence of monetary policy.
Flynn, John, "Financial Innovation and the Implications for Monetary Policy and Portfolio Hedging" (2019). Masters of Science in Economic Theory and Policy. 20.