| Summary: | The first chapter studies how two different financial institutions-- asset markets and financial intermediaries-- allow consumers to allocate their resources over a period and provide liquidity to them when facing liquidity preference shocks and random returns on illiquid assets. For that purpose, an overlapping generations model in which agents are subject to random relocation shocks is formed. Fiat money is introduced explicitly as a tool for consumers to address limited communication and random relocation problems. This article also analyses the mechanism of asset price determination when the economy is hit by several stochastic shocks by drawing together the results of the scattered studies into a comprehensive view. The framework and outcomes of this chapter will also be used as the basis for chapters 2 and 3. In Chapter 2 it is shown that under asymmetric information and limited participation in financial markets, bank runs (or bankruptcy) may help uninformed agents to achieve an efficient allocation since bank runs can reveal hidden information. The production of information is made efficiently without cost, at which point there is a distinction between this paper and most other related studies. The efficient bank run provides a new ground for the coexistence of banks and financial markets. Even when all the agents deposit their whole endowment goods with the bank, financial intermediaries and markets coexist once bank runs happen. Allowing a run implies that investment in liquidity can be minimised. This effect is strengthened when agents have limited access to a market. In Chapter 3 a general equilibrium model is made by applying the \textit{Lucas island model} and the \textit{random-relocation model} and the following results are derived: (1) The amount of liquid assets held by the whole economy, as well as the regions where securitization is present, decreases significantly with securitization. As the economy can invest its resources more efficiently, both consumption and welfare increase. The impact of securitization on banks' liquidity, consumption, and welfare, however, depend on the population structure of each region. This result may have important policy implications with regards to the effect of global asset shortages on bubbles and global imbalances. (2) Expansionary monetary policy can affect the bank's portfolio composition, but this outcome depends on the magnitude of the elasticity of substitution coefficients. (3) A randomised monetary policy combined with other real shocks cause banks to suffer from a signal extraction problem.
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