Real investment and dividend policy in a dynamic stochastic general equilibrium (DSGE) model. Corporate finance at an aggregate level through DSGE models.

摘要

In this thesis, I take a theoretical dynamic stochastic general equilibrium (DSGE) approachudto investigate optimal aggregate dividend policy. I make the following contribution:ud1. I extend the standard DSGE model to incorporate a residual dividend policy,udexternal financing and default and find that simulated optimal aggregate payouts areudmuch more volatile than the observed data when other variables are close to the valuesudobserved in the data.ud2. I examine the sensitivity of optimal aggregate dividend policy to the level of theudrepresentative agent¿s habit motive. My results show that, when the habit motive getsudstronger, the volatility of optimal aggregate payouts increases while the volatility ofudaggregate consumption decreases. This is consistent with the hypothesis that investorsuduse cash payouts from well diversified portfolios to help smooth consumption.ud3. I demonstrate that the variability of optimal aggregate payouts is sensitive toudcapital adjustment costs. My simulated results show that costly frictions from changingudthe capital base of the firm cause optimal aggregate dividends and real investments toudbe smooth and share prices to be volatile. This finding is consistent with prior empiricaludobservations.ud4. I run simulations that support the hypothesis that optimal aggregate dividendudpolicy is similar when the representative firm is risk averse to when it has capitaludadjustment costs. In both cases, optimal aggregate dividends volatility is very low.ud5. In all calibrated DSGE models, apart from case 4, optimal aggregate payoutsudare found to be countercyclical. This supports the hypothesis that corporations preferudto hold more free cash flows for potential investment opportunities instead of payinguddividends when the economy is booming, but is inconsistent with observed data.udKeywords: Dynamic Stochastic General Equilibrium (DSGE), real business cycle,udutility function, habits, dividends