Academic literature on the topic '340208 Macroeconomics (incl. Monetary and Fiscal Theory)'

Abstract of thesis submitted in partial fulfilment of the requirements for the Degree of Master of Commerce and Management Dynamics of macroeconomic variables in Fiji : a cointegrated VAR analysis By Shiu Raj Singh The objective of this study is to examine how macroeconomic variables of Fiji inter-relate with aggregate demand and co-determine one another using a vector autoregression (VAR) approach. This study did not use a prior theoretical framework but instead used economic justification for selection of variables. It was found that fiscal policy, which is generally used as a stabilisation tool, did not have a positive effect on real Gross Domestic Product (GDP) growth in the short term. Effects on GDP growth were positive over the long term but not statistically significant. Furthermore, expansionary fiscal policy caused inflationary pressures. Fiji has a fixed exchange rate regime, therefore, it was expected that the focus of monetary policy would be the maintenance of foreign reserves. It was, however, found that monetary expansion in the short term resulted in positive effects on real GDP growth and resulted in inflation. The long term effects of monetary policy on real GDP growth were negative, which are explained by the fixed exchange rate regime, endogenous determination of money supply by the central bank, an unsophisticated financial market and, perhaps, an incomplete transmission of the policy. Both merchandise trade and visitor arrivals growth were found to positively contribute to short term and long term economic growth. Political instability was found not to have significant direct effects on real GDP growth but caused a significant decline in visitor arrivals which then negatively affected economic growth in the short term.

This paper summarises a series of Asia-Pacific based studies that explore three distinct central and commercial banking regimes, looking at interest rate pricing and transmission. This research is significant for several reasons: (a) the relative lack of research into pricing behaviour and price transmission in Asia-Pacific, (b) the development of new tools to analyse non linear cointegration and hence price asymmetry, (c) economic and financial convergence is now a topic of regional importance, (d) transmission and price behaviour evidence has not been documented in the context of the different central bank policy signaling regimes evident in the region, (e) the banking markets in the region are clearly in the midst of a consolidation and globalisation phase. This follows rapidly from the 1997/98 financial-crisis, (f) there is little evidence in the region of how advances in risk management practice have impacted the price behaviour of the banking industry. A number of findings have been documented. Regional financial integration appears already under way, evidenced by both regional banking mergers and regional consistency in the timing of structural breaks during the Asian crisis. Transmission of policy rates to wholesale rates appears rapid in the case of Hong Kong (HK) and New Zealand (NZ), but slow in the case of Singapore with its currency-basket regime. Generally, there is little evidence of asymmetric interest rate pricing practices in Singapore and HK, whilst asymmetry noted for NZ appears to be largely a function of how banks reacted in a significant decline in rates over a long period prior to the implementation of the Official Cash Rate.
Professional Doctorate

This paper relates openness to the decline in inflation by using panel data for six OECD (the USA, Japan, Canada, Portugal, Finland, and Australia) countries over the period from 1980 to 2006. I obtain industrial level data for twenty industries in each of the six countries in the timeframe and estimate the effects of increases in openness, through its effect on productivity and markups on inflation. The methods used to construct the variables in this paper follow methods introduced in Chen, Imbs and Scott (2004), and the estimations follow Chen, Imbs and Scott (2007). The results suggest openness reduces the rate of inflation in the short run. Furthermore, it also reduces short run productivity and markups. The long run results are ambiguous, however. The evidence that openness leads to anti-competitive effects in the long run is weak. JEL Classification: E31, F12, F14, F15, L16 Keywords: Openness, Prices, Productivity, Markups

Labor market indicators such as unemployment and labor force participation show a significant amount of heterogeneity across demographic groups, which is often not incorporated in monetary policy analysis. This dissertation is composed of three essays that explore the effect of labor market heterogeneity on the design and conduct of monetary policy. The first chapter, Effect of Monetary Policy Shocks on Labor Market Outcomes, studies this question empirically by looking at dynamics of macroeconomic outcomes to a monetary policy shock. I construct a measure of monetary policy shock using narrative methods that represent the unanticipatory changes in policy. Impulse response of unemployment rates for high and low-skill workers show low-skill workers bear a greater burden of contractionary monetary policy shock. Their unemployment rates increase by almost four times that of the high-skill group. Even though we see differences in dynamic response of unemployment rates, the empirical analysis shows some puzzling results where effects of contractionary shock are expansionary in nature. Moreover, these results are plagued by the “recursiveness assumption” that the shock does not affect current output and prices, which is at odds with theoretical models in the New Keynesian literature. In the second chapter, Skill Heterogeneity in an Estimated DSGE Model, I use a structural model to better identify these shocks and study dynamic responses of outcomes to economic shocks. I build a dynamic stochastic general equilibrium model, which captures skill heterogeneity in the U.S. labor market. I use Bayesian estimation techniques with data on unemployment and wages to obtain distribution of key parameters of the model. Low-skilled workers have a higher elasticity of labor supply and labor demand, contributing to the flatness of the wage Phillips curve estimated using aggregate data. A contractionary monetary policy shock has immediate effects on output and prices, lowering both output and inflation. Moreover, it increases unemployment rates for both high and low-skill groups, the magnitude being larger for the latter group. The presence of labor market heterogeneity will have new implications for the design of monetary policy, that I study in the third chapter, Optimal Monetary Policy with Skill Heterogeneity. I design an optimal policy for the central bank where policymakers respond to the different inflation-unemployment trade-off between high and low-skill workers. The monetary authority must strike a balance between stabilization of inflation, GDP and outcomes of high and low-skill workers separately. This optimal policy can be implemented by a simple interest rate rule with unemployment rates for high and low-skill workers and this policy is welfare improving.

This dissertation consists of three independent chapters at the intersection of macroeconomics and labor economics. The first chapter studies the job-search trade-offs between full-time employment, part-time employment, and multiple job holdings. The second chapter explores the macroeconomic relationship between property crime and output in a dynamic stochastic general equilibrium framework. The third chapter studies the causal effect of property crime on output.

The first chapter develops a search-matching model of the labor market with part-time employment and multiple job holdings. The model is calibrated to data from the CPS between 2001 and 2004. Workers are able to choose their search intensity and are allowed to hold two jobs while firms can choose what type of worker to recruit. When compared to the canonical Diamond-Mortensen-Pissarides model, this model performs quite well while capturing some empirical regularities. First, the model generates recruiting and vacancy posting rates that move in opposite directions. Second, part-time employment is up to 10 times more responsive than full-time employment. Third, the model suggests that multiple job holding rates are more flexible than observed in the data with the rate changing by as much as 4 percentage points compared to 0.1 percentage points in the data. Finally, the full model is able to capture compositional changes during recessions with the full-time rate declining and the part-time rate increasing. It also produces an empirically consistent increase in the unemployment rate as well as a decrease in output. The DMP model is more muted than in the data for both.

The second chapter explores how property crime can affect static and dynamic general equilibrium behavior of households and firms. I calibrate a model with a representative firm and heterogeneous households where households have the choice to commit property crime. In contrast to previous literature, I treat crime as a transfer rather than home production. This creates a feedback loop wherein negative productivity shocks increase property crime which further depresses legitimate work and capital accumulation. These responses by households are particularly important when thinking about the effect of property crime on the economy. Household and firm losses account for 24% of compensating variation (CV) and 37% of lost production. This suggests that behavioral responses are quite important when calculating the cost of property crime. Finally, on the margin, decreasing property crime by 1% increases social welfare by 0.19%, but the effect is diminishing suggesting that reducing crime entirely may not be optimal from a policymakers perspective.

The third chapter estimates the causal effect of property crime on real personal income per capita. Running system GMM on an unbalanced panel of MSA-year pairs suggests that property crime reduces real personal income per capita by a highly statistically significant 13.3%. This implies that the average person loses $4,869 (2009 dollars) per year with real annual personal income per capita totaling $36,615. The effect is driven primarily by larceny-theft and burglary with highly statistically significant coefficients of -0.179 and -0.110 respectively. Estimates for the effect of robbery are unstable, and the effect of motor vehicle theft is statistically significant, but smaller with a coefficient of -0.060.