Essays on banking, asset pricing and learning

This dissertation consists of three essays.;The first essay, entitled 'Borrowing Constraints in a Dynamic Model of Bank Asset and Liability Management', examines factors behind the observed heterogeneity in borrowing and lending behavior across banks. A bank franchise is identified with loan opportunities and a core deposit base which, for geographical or informational reasons, are unique to the bank, and which fluctuate over time. A bank's debt capacity is limited due to an agency problem between the bank and potential money market lenders. Debt capacity is determined by the evolution of lending opportunities and deposits over time. The model is consistent with existing stylized facts about the behavior of banks of different sizes. Further evidence on the existence of borrowing constraints for banks with different types of branching networks is presented.;The second essay, entitled 'Lending Booms and Asset Price Inflation', studies conditions for the emergence of gradual increases in foreign lending associated with high risk, low quality investment as well as asset price inflation. The paper considers the interaction of government bailout guarantees with a commitment problem on the part of borrowers. The gradual growth of credit and asset prices is driven by entrepreneurial net worth through a financial accelerator mechanism. Booms need not end in a crash, but the economy may experience a 'soft landing' if the high risk strategy is successful long enough.;The third essay, entitled 'Strategic Experimentation and Disruptive Technological Change', studies technology adoption in oligopoly markets when there is uncertainty about whether a new technology introduced by an entrant has the potential to eventually replace the currently dominant one which is employed by incumbents. This situation is modelled as a dynamic game with learning. An algorithm to solve numerically for Markov Perfect Equilibria is developed. Firm investment strategies are characterized as functions of current firm capabilities as well as beliefs about the potential of the new technology. The model is used to examine the factors driving incumbents' adoption decisions and the persistence of market power.