Rozprawy doktorskie na temat „Macroeconomics”

This thesis discusses the three issues that are important to macroeconomic policymakers. First, I examine the role of inventories over the business cycle. Despite accounting for less that 1% of the level of GDP, inventory changes have made up almost 50% of the post-war volatility of US GDP growth, and yet most models of the business cycle exclude inventories. I develop a dynamic business cycle model that incorporates distribution inventories as well as simple storage inventories. I find that the behaviour of inventories in this model matches the aggregate data well. However, there is little evidence that improved inventory management contributed to the decline in macroeconomic volatility over the last quarter of a century. Second, the optimal design of a monetary policy committee (MPC) is examined as to whether such committees should include a mix of members from outside (external) as well as inside central banks (internal). Using a new theoretical model of voting behaviour on a mixed committee, it is shown that, under certain circumstance and behaviour, the presence of external committee members may be beneficial. However, using the voting record of the Bank of England's MPC, reveals a problem; there is evidence of an agency problem which may eliminate any benefit to the appointment of external members. These results undermine the current intuition as to why such mixed committees should be employed by policymaking institutions. Finally, I investigate the effect of policy uncertainty on household saving using a quasi-natural experiment from Germany in the late 1990s. Around the 1998 election, there was a marked increase in uncertainty; using the fact that civil servants were largely unaffected by this policy uncertainty, we show that households reacted to the increase in uncertainty by saving more and, where possible, by working more via the margin offered by part-time employment.

This thesis consists of seven essays that deal with microfunctions of macroeconomics. Two important questions that are addressed in this context are: (i) Do we expect to obtain stylised facts of macroeconomics from microstructures that we observe in labour, financial and product markets (for instance forms of contracts, organisation of wage determination, institutional features)? (ii) Can these microstructures that we observe be explained in a coherent way? Once we answer these questions, we can also reach "efficiency" conclusions and determine certain costs and benefits of different microstructures. This thesis tries to tackle these questions in specific cases. In particular, we investigate these issues in the context of (a) business cycle fluctuations, (b) the persistence and volatility in the time-series relationship behaviour of unemployment and wages, (c) the recent high levels and persistence of long-term unemployment, (d) the time-series relationship between investment and output, (e) the nature and form oflabour, product market and financial contracts.

In this thesis I analyze 3 current empirical questions of interest in macroeconomics. The first concerns the effect of competition on cash holdings. The large increase in cash held by US firms has increased interest in competition as a possible driver, with contradictory results in the literature. I show that low profitability firms increase cash as a response to competition, whereas high profitability firms do the reverse. Afterwards, I focus on the effects of financial structure on productivity. An interesting empirical pattern is uncovered: a firm’s own debt does not harm its own productivity, but aggregate debt does. The negative relationship is shown to work through a real estate valuation channel. Finally, I uncover short-lived pro-cyclical spikes of adjusted aggregate productivity precisely timed at the beginning and end of recessions. I show that they are likely to be associated with demand-side movements, rather than technology shocks.
En aquesta tesi analitzo 3 qüestions empíriques actuals d'interès en macroeconomia. La primera tracta sobre l'efecte de la competència en els balanços d'efectiu. El gran increment en l'efectiu en possessió d'empreses dels Estats Units ha dut interès en la competència com a possible causa. En aquesta tesi es demostra que les empreses amb baixos beneficis incrementen el seu efectiu en resposta a més pressió competitiva, mentre que les empreses amb beneficis alts fan el contrari. La segona qüestió és l'efecte de l'estructura financera en la productivitat. Un patró interessant és descobert, el deute d'una empresa no fa baixar la seva productivitat, però sí que ho fa el deute agregat. Aquesta relació sembla causada per un canal basat en els preus immobiliaris. Finalment, es detecten moviments de la productivitat ajustada per utilització, pro-cíclics, poc persistents i durant exactament el principi i el final de les recessions. Aquests semblen causats per factors relacionats amb la demanda, i no factors tecnològics.

In this thesis we analyze learning mechanisms applied to a variety of macroeconomic models. In the first chapter, we present and discuss the advantages and limitations of estimating Dynamic Stochastic General Equilibrium (DSGE) models added with learning, thus suppressing the central assumption of rational expectations. First, we introduce the reader on how learning can be inserted in those models, starting from the discussion of where and how the rational expectations operator is substituted by the learning mechanism. We then present several additional learning setups related to the information set available to agents considered by the literature, which affect directly the dynamics of the final model. Last, we estimate three different models to assess the advantages of learning in our artificially generated data and real data for Brazil. In the second chapter, we algebraically show the limitations of learning and propose two flexible methods to deal with the parameter instability in data. The first of these methods is closely related to the DSGE-VAR methodology, which we call Learning DSGE-VAR, and the second, which departs even further from the DSGE model, which we call Learning Minimum State Variable, or LMSV. Finally, in the third chapter we provide evidences that the supposedly moderate improvements found in the previous chapters have more to do with the nature of the model at hand than to the learning method itself. To do so, we simulate problems using a time-varying structure similar to the one presented in chapter 1 and evaluate the likelihood improvements with different learning mechanisms. We then provide empirical evidences of learning in reduced form models to forecast inflation, interest rates and output gap for the Brazilian economy, using ad-hoc reduced form models commonly used by practitioners.
Nesta tese analisamos os instrumentos de aprendizado (Learning) aplicados a uma variedade de modelos macroeconômicos. Em nosso primeiro capítulo, apresentamos e discutimos as vantagens e limitações de se estimar modelos dinâmicos e estocásticos de equilíbrio geral (DSGE) acrescidos de um mecanismo de aprendizado, ou seja, abandonando-se a hipótese de expectativas racionais, tão cara a estes modelos. Em primeiro lugar, mostramos como esse mecanismo pode ser introduzido nesses modelos, começando pela discussão de onde e como o operador de expectativas racionais é substituído pelo operador de aprendizado. Em seguida apresentamos configurações alternativas em relação ao conjunto de informações disponível aos agentes dentro do mecanismo de aprendizado, que afeta diretamente a dinâmica do modelo final a ser estimado. Por fim, estimamos três modelos usando nosso mecanismo de aprendizado, aplicando-o a dados artificiais e reais para a economia brasileira. No segundo capítulo, mostramos algebricamente as limitações do mecanismo de aprendizado em modelos DSGE e propomos dois métodos mais flexíveis para lidar com a instabilidade dos parâmetros nos dados. O primeiro desses métodos é intimamente ligado à literatura de DSGEVAR, e que chamamos de Learning DSGE-VAR, enquanto o segundo método, que se afasta ainda mais do modelo DSGE, ao qual chamamos de LMSV. No terceiro capítulo, provemos evidências de que os ganhos supostamente moderados de nosso modelo de aprendizado apresentados nos dois primeiros capítulos têm mais a ver com a natureza dos modelos estimados do que com o método de aprendizado utilizado. Para tal, simulamos dois grupos de dados usando uma estrutura econômica que varia no tempo, semelhante àquela estudada no primeiro capítulo, e estimamos os modelos utilizando diferentes mecanismos de aprendizado. Por fim, fornecemos evidências empíricas de aprendizado em modelos de forma reduzida para projetar inflação, taxas de juros e hiato do produto para a economia brasileira, através de modelos ad-hoc comumente utilizado por econometristas.

This thesis consists of three chapters. The first chapter examines empirically the relationship
between foreign aid and economic growth in the Least Developed Countries. Instrumental
variables techniques are used to estimate the effect that economic growth has on foreign aid
and to adjust for the reverse causal effect that growth has on aid when estimating the effect that
aid has on growth. The second chapter examines the effects that fiscal expansions have on the
unemployment rate. The chapter presents SVAR evidence for ten OECD countries and builds a
DSGE model with a labor force participation choice and workers' heterogeneity to explain the
empirical findings. The third chapter examines the effects that economic growth has on the
support for extreme political platforms. The chapter provides a theoretical model in favor of
growth effects (as opposed to level effects) on the support for extreme political parties, and
investigates empirically the relationship between growth and extremist votes for 16 OECD
countries.

Esta tesis consiste en tres capítulos. El primer capítulo examina empíricamente la relación entre
la ayuda exterior y crecimiento económico en los países menos adelantados. Técnicas de
variables instrumentales se utilizan para estimar el efecto que el crecimiento económico tiene
sobre la ayuda exterior y para ajustar el efecto de causalidad inversa que el crecimiento tiene en
la ayuda al estimar el efecto que la ayuda tiene sobre el crecimiento. El segundo capítulo
analiza los efectos que las expansiones fiscales tienen sobre la tasa de desempleo. El capítulo
presenta pruebas SVAR para diez países de la OCDE y construye un modelo DSGE con una
participación en la fuerza de trabajo y heterogeneidad de los trabajadores para explicar los
resultados empíricos. El tercer capítulo analiza los efectos que el crecimiento económico tiene
en el apoyo a las plataformas políticas extremas. El capítulo ofrece un modelo teórico a favor
de los efectos del crecimiento (en contraposición a los efectos de nivel) con el apoyo de
partidos políticos de extrema, e investiga empíricamente la relación entre el crecimiento de
votos y extremistas para 16 países de la OCDE.

This thesis is composed of three chapters. The first chapter argues that boom-bust behavior in asset prices can be explained by a model in which boundedly-rational agents learn the process for prices. The key feature of the model is that learning operates in both the demand for assets and the supply of credit. Interactions between agents on either side of the market create complementarities in their respective beliefs, providing an additional source of propagation. In contrast, the chapter shows why learning involving only one side on the market, the focus of most of the literature, cannot plausibly explain persistent and large price booms. Quantitatively, the model explains recent experiences in US housing markets. The full appreciation in US house prices in the 2000s can be generated from observed mortgage rate changes. The model also generates endogenous liberalizations in household lending conditions during price booms and replicates key volatilities of housing market variables at business cycle frequencies. The second chapter presents a learning model in which households are endowed with recursive preferences. The chapter evaluates how the introduction of bounded rationality in beliefs effects the level of long run consumption risk in the economy. The chapter shows that structural learning frameworks currently found in the literature lead to a perception of low persistence in exogenous shocks, regardless of the underlying stochastic processes in the economy. Generating long run risk requires a preference for late resolution of uncertainty. The third chapter provides an explanation for two features of the world saving distribution: (i) saving rates are significantly different across countries and they remain different for long periods of time; and (ii) some countries and regions have shown very sharp changes in their average saving rates over short periods of time. It formalizes a model of the world economy comprised of open economies inhabited by heterogeneous agents endowed with recursive preferences. The model can generate the time series behavior of saving observed in the data from measured productivity shocks. The model can also generate the sudden and long-lived increase in East Asian savings by incorporating shocks to societal aspiration.
Arts, Faculty of
Vancouver School of Economics
Graduate

There is growing acknowledgement that changes in expectations are an important cause of the business cycle. Business cycles are characterized by positive co-movements between consumption, investment, output and hours, yet changes in expectations cannot generate such positive co-movements in the most standard neo-classical business cycle model. If one is willing to entertain a richer production technology, it is possible to obtain the kind of fluctuations typical of business cycles that are caused by expectation revisions. This thesis analyzes systematically such a production technology, characterized by a nonlinear transformation curve between consumption and investment at the aggregate level, and evaluate some of its macroeconomic implications. This thesis comprises three essays. The first essay empirically investigates if the proposed change in the production technology improves the capacity of neo-classical business cycle models to account for the behavior of the aggregate labor market. It finds that the proposed change is a partial improvement over standard models. The second essay shows that while a nonlinear transformation curve helps in obtaining an economic expansion following good news about future productivity gains, it can do so only if the intertemporal elasticity of substitution in consumption is high. To obtain an expansion in the more general case, one has to allow for a sufficiently high degree of complementarity between capital and labor in production. The third essays estimates a version of the model to analyze its business cycle properties. In the model, the nonlinear transformation curve arises because some resources need to be spent to distribute goods to their final use. There, it is found that the estimated model reproduces well the dynamics of output and investment but produces too much consumption volatility. Moreover, it suggests that news about future productivity changes are a more important source of economic fluctuation than actual changes in productivity. Finally, the estimated model produces distribution costs that are quite in line with the data.

This dissertation studies two important topics in macroeconomics. The first topic is on the corporate cash hoarding. The first two chapters analyze the cash-inventory tradeoff from two different but complementary perspectives and shed light on the causes of cash hoarding. The second topic is international business cycles. A new feature of capital market is introduced into a standard international business cycle model to account for the disconnect between theory and data. The first chapter proposes an explanation for the joint dynamics of cash and inventory -- the adoption of the Just-in-Time (JIT) system. I start by demonstrating the importance of JIT in shaping corporate cash. I then develop a dynamic stochastic model to analyze the mechanisms and quantify their impacts. In the model, both cash and inventory can serve as working capital. As firms switch over from the traditional operating system (Just-in-Case, JIC) to JIT, they allocate the resources freed up from inventory to cash, in order to ensure smooth transactions with suppliers. On average, this switchover accounts for 45% and 69% of the observed cash increase and inventory decline respectively. The second chapter provides a complementary explanation for the cash-inventory joint dynamics. It models inventory as a reversible store of liquidity and studies the tradeoff between cash and inventory when a firm manages its liquidity needs. I argue that two key determinants of a firm's resource allocation decision are its market power and its exposure to risk. In the model, firms with lower market power and firms operating in riskier environments rely more heavily on cash rather than inventory. Model implications are supported by data. The third chapter studies the role of limited asset market participation (LAMP) in explaining international business cycles. We show that when LAMP is introduced into an otherwise standard model of international business cycles, the performance of the model improves significantly, especially in matching cross-country correlations. To perform formal evaluation of the models we develop a novel statistical procedure that adapts the statistical framework of Vuong (1989) to DSGE models. Using this methodology, we show that the improvements brought out by LAMP are statistically significant.

This dissertation consists of two papers in the field of Macro Labor and one paper in the field of global games. In particular, the first two chapters focus on studying why the progress of job polarization has been different across industries between 1980 and 2010 and the last chapter analyzes the interaction between the precision of exogenous and market generated information in coordination economies.

The first chapter empirically explores the relationship between job polarization and interindustry wage differentials. By using the U.S. Census and EU KLEMS data, we find that the progress of job polarization between 1980 and 2009 was more evident in industries that initially paid a high wage premium to workers than in industries that did not. We argue that this phenomenon can be explained as a dynamic response of firms to interindustry wage differentials: firms with a high wage premium seek alternative ways to cut production costs by replacing workers who perform routine tasks with Information, Communication, and Technology (ICT) capital. The replacement of routine workers with ICT capital has become more pronounced as the price of ICT capital has fallen over the past 30 years. As a result, firms that are constrained to pay a relatively high wage premium have experienced slower growth of employment of routine workers than firms in low-wage industries, which led to heterogeneity in job polarization across industries.

Then the second chapter proposes a theory that unveils the mechanism underlying the close relationship between job polarization and interindustry wage differentials, which is studied empirically in the first chapter. In particular, we develop a two-sector neoclassical growth model with three key features. First, industries differ in the wage rates they pay to workers. Second, routine workers are relative substitutes for capital while non-routine workers are relative complement to capital. Last, there is an exogenous investment-specific technology change. Main predictions of the model are that (1) job polarization is more evident and (2) capital-routine worker ratio increases more in the industry that pays higher wages to workers when there is an investment-specific technology change, which are consistent with the empirical findings in the first chapter.

In the last chapter, we study the interaction between the precision of exogenous and market-generated information in a class of economies where firms display coordination motives in presence of dispersed information and where the outcome of the coordination is traded in a competitive asset market á-la Grossman and Stiglitz (1980). We show that when more private information is injected in the coordination economy the equilibrium asset price becomes less informative. To showcase the relevance of our result we present an application to a problem of endogenous information choice where the "Knowing What Others Know" property of information acquisition derived by Hellwig and Veldkamp (2009) breaks down in presence of market-generated information.

PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIRO
COORDENAÇÃO DE APERFEIÇOAMENTO DO PESSOAL DE ENSINO SUPERIOR
CONSELHO NACIONAL DE DESENVOLVIMENTO CIENTÍFICO E TECNOLÓGICO
PROGRAMA DE SUPORTE À PÓS-GRADUAÇÃO DE INSTS. DE ENSINO
PROGRAMA DE DOUTORADO SANDUÍCHE NO EXTERIOR
Esta tese é composta por três artigos relacionados à macroeconomia. O primeiro artigo analisa os efeitos macroeconômicos dos processos de aprofundamento de crédito observados no Peru e no México através de um modelo padrão Novo Keynesiano dinâmico de equilíbrio geral com fricções financeiras. Do ponto de vista do modelo, os efeitos sobre o consumo, o PIB e o investimento são pequenos. Assim, nossos resultados sugerem apenas uma contribuição modesta da expansão do crédito para o crescimento acima do potencial das economias peruana e mexicana durante o período considerado. No segundo artigo, documentamos que a associação entre o crescimento do consumo e expansão do crédito é maior para países com maior desigualdade de renda. Nós usamos um modelo de mercados incompletos com agentes heterogêneos, risco idiossincrático e restrições ao crédito para verificar em que medida este arcabouço teórico é capaz de racionalizar a evidencia empírica. Em nosso modelo, consideramos duas fontes de desigualdade de renda: a variância do risco idiossincrático e o nível fixo de capital humano dos agentes. Mostramos que, quando a fonte de desigualdade de renda vem da menor nível fixo das famílias do capital humano, o nosso modelo pode racionalizar a evidência empírica. Nos outros casos, o resultado oposto ocorre. O terceiro artigo testa os efeitos de um grande programa de intervenções no mercado cambial anunciado pelo Banco Central do Brasil afim de combater o excesso de volatilidade e overshooting da taxa de câmbio. Nós usamos uma abordagem de controle sintético para determinar se o programa de intervenção foi bem sucedido ou não. Nossos resultados sugerem que o primeiro programa de intervenção cambial mitigou a depreciação do real frente ao dólar. Todavia, um segundo anúncio feito no final do ano que o programa ia continuar com uma intensidade menor teve um efeito menor e não significativo. Esse resultado é corroborado por uma metodologia de estudo de evento padrão. Nós também documentamos que o programa e a continuação do mesmo não tiveram impacto sobre a volatilidade da taxa de câmbio.
This dissertation is composed of three articles in macroeconomics. The first article explores the macroeconomics effects of the credit deepening processes observed in Peru and Mexico using a standard New Keynesian dynamic general equilibrium model with financial frictions. From the perspective of the model, the effects on consumption, GDP and investment are small. Hence, our results suggest only a modest contribution of credit expansion to the abovetrend growth experienced by Peruvian and Mexican economies during our sample period. In the second article, we documented that the association between consumption growth and credit expansion is stronger in countries with higher income inequality. We use an incomplete-markets model with heterogeneous households, idiosyncratic risk and borrowing constraints to corroborate this empirical finding. A loosening of credit constraints mitigates precautionary motives, inducing households to reduce savings along the transition path to the new steady-state. Therefore, consumption grows more rapidly in the shortrun. This consumption boom is amplified in economies with more constrained households. We consider two sources of income inequality in our model: the variance of the idiosyncratic risk and the households fixed level of human capital. They have different implications for the extent to which households are credit constrained in equilibrium. We show that when the source of income inequality comes from households lowest fixed level of human capital, our model can rationalize the empirical evidence. In the other cases, the opposite occurs. The third article tests the effects of a major program of interventions in foreign exchange markets announced by the Central Bank of Brazil to fight excess volatility and exchange rate overshooting. We use a synthetic control approach to determine whether or not the intervention program was successful. Our results suggest that the first foreign exchange intervention program mitigated the depreciation of the real against the dollar. A second announcement made later in the year that the program was going to continue on a smaller basis had a smaller effect, which was not significant. This result is corroborated by a standard event study methodology. We also document that both program did not have an impact on the volatility of the exchange rate.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2003.
Includes bibliographical references.
In this thesis, I cover three relevant topics in macroeconomics: the effects of trade liberalization, the effect of institutions and the determinants of credibility on macroeconomic policies. The first essay revisits the empirical work on the effects of trade liberalization and analyzes how it affects growth through two distinct channels: through better access to intermediate supplies and through tougher foreign competition. In particular, both effects are significant: while the first boosts growth the second one hinders it. Moreover, the effect of the first channel outweighs the effect of the second one. The second essay is an empirical analysis showing that weaker institutions increase transaction costs, particularly the costs incurred by a firm when dealing with suppliers of intermediate goods. In particular, It is showed that industries with a more complex intermediate structure suffer a relatively larger loss of productivity in countries with poorer institutions. The third essay revisits the theoretical determinants of governments' credibility in regard to outstanding debt. Governments default not because they want to, but because they cannot avoid it. Under this and other assumptions, some standard results need no longer hold. For instance, appointing a conservative policymaker or denominating public debt in foreign currency may reduce credibility.
by Roberto Alejandro Neut.
Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2012.
Cataloged from PDF version of thesis.
Includes bibliographical references (p. 143-149).
This thesis examines questions in macroeconomics motivated by the 2007-2008 financial crisis and its aftermath. Chapter 1 studies the impact of a housing bust on regional labor reallocation and the labor market. I document an empirical fact, which suggests that, by increasing the fraction of households with negative housing equity, a housing bust hinders interregional mobility. I then study a multi-region economy with local labor and housing markets and worker reallocation. A housing bust creates debt overhang for some workers, which distorts their migration decisions and increases aggregate unemployment in the economy. In a calibrated version of the model, I find that the regional reallocation effect of the housing bust can account for between 0.2 and 0.5 percentage points of aggregate unemployment and 0.4 and 1.2 percentage points of unemployment in metropolitan areas experiencing deep local recessions in 2010. Chapter 2 studies a model of endogenous fluctuations in credit market conditions. I consider an economy with productivity heterogeneity and durable capital. Entrepreneurs issue debt to buy capital but have superior information about the distribution of their future productivity and, hence, of their debt repayments. Additionally, limited pledgeability of high output realizations creates a wedge between the valuations of inside and outside investors. The combination of these two frictions leads to a new channel of interaction between the price of capital and the credit market, which in turn leads to multiple equilibria and fluctuations in output, the price of capital, and leverage across equilibria. I then use the model to analyze the effect of unconventional monetary policy by a central bank. Financial instability is often characterized by increased uncertainty, debt rollover difficulties and asset liquidation at depressed prices. Chapter 3, which is a joint work with Felipe Iachan, studies a debt roll-over coordination game with dispersed information and market-determined liquidity conditions. We describe conditions under which an improvement in the precision of individuals' information about financial institutions' fundamentals leads to greater financial stability. For the limiting case of arbitrarily precise private information, that condition obtains a simple form in terms of payoff elasticities. Finally, we discuss the effects of stress tests and the "living will" mandate from the Dodd-Frank act. We conclude that given our framework, the latter policy should have a large positive impact for financial stability.
by Plamen T. Nenov.
Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2006.
Includes bibliographical references.
This dissertation consists of three essays. The first one studies the effect of labor policy, in particular of firing costs, on financially restricted firms. It proposes and models an effect of firing costs that has not been described in the literature so far. When a time gap exists between production and its associated revenues, firing can become a liquidity adjustment tool that allows firms to increase their short-term liquidity. The presence of firing costs reduces the ability of firms to use this tool. This reduction negatively affects the optimal levels of investment and production of financially restricted firms. I present empirical evidence in line with this effect. The second essay studies the empirical relationship between aggregate macroeconomic volatility and idiosyncratic firm-level volatility. This relationship is a testable implication of a rich set of theoretical models available in the literature. I propose a consistent estimator of the variance of firms' real sales growth rate (proxy for idiosyncratic volatility) based on the cross-sectional properties of firms' distribution. I use optimal structural break tests and long-run relationship tests to study the relationship between aggregate and idiosyncratic firm-level volatility. The main empirical results suggest a negative and significant long-run relationship.
(cont.) The third essay, coauthored with Norman Loayza, analyzes potential monetary and fiscal policy biases that could result from the interaction between fiscal and monetary authorities-in a macro-policy environment where the monetary authority is committed to independently controlling inflation. We show that an increase in the divergence of authorities' preferences, with respect to the short-run trade-off between output and inflation gap, could lead to higher fiscal deficits and higher interest rates. We use a game-theoretic model to analyze this interaction, and we present supporting empirical evidence based on a panel data estimation for industrial countries.
by Herman Z. Bennett.
Ph.D.

Thesis advisor: Fabio Ghironi
Chapter 1: Foreign Direct Investment and Contract Enforcement Many developing countries are financially constrained and therefore have to rely on international capital flows to finance economic activity. Empirical evidence shows that Foreign Direct Investment (FDI) as a percentage of total capital flows is higher for less developed countries compared to more developed countries. This chapteruses a dynamic contracting model with human capital to explain why less developed countries receive a greater percentage of capital flows as FDI. I analytically show that countries that are financially constrained have a higher share of FDI in total capital flows, and that the share of FDI in total capital flows is increasing in human capital flows. In addition, the positive association between the share of FDI in total capital flows and human capital flows is decreasing in the degree of financial constraints. I construct a measure of intangible assets of FDI and find empirical support for the analytical results. Chapter 2: Trade Liberalization, Firm Heterogeneity, and Unemployment: An Empirical Investigation This chapter is a joint work with Yoto V. Yotov. We provide empirical evidence for the interaction between firm-level total factor productivity and trade liberalization as key determinants of firm-level job destruction caused by trade. Employing US firm-level data, we find strong empirical support for the following: a) All else equal, a one percent increase in total factor firm productivity decreases trade-induced layoffs by 32%; b) An additional percent of trade liberalization increases the number of firm-level trade-induced layoffs by 2%; c) Trade liberalization results in an increase in the minimum level of productivity required for domestic production; d) Trade liberalization lowers the minimum productivity threshold required for exporting; e) The increase due to trade liberalization in the minimum productivity threshold for domestic production is larger than the absolute decrease in the export productivity threshold. Chapter 3: Do Audit Fees Influence Credit Risk and Asymmetric Information Problems? Evidence from the Syndicated Loan Market This chapter is a joint work with Lewis W. Gaul. We examine whether an increase in the demand for auditing services is associated with a decrease in borrowers' credit risk and asymmetric information problems in the syndicated loan market. In the syndicated loan market, potential accounting errors exacerbate credit risk and asymmetric information problems. The purpose of financial statement audits is to provide reasonable assurance that accounting records are free from material errors. We hypothesize that if audit fees face an upward sloping supply curve for auditing services, an increase in the demand for auditing services increases both the equilibrium price and quantity of auditing services purchased. We interpret the equilibrium quantity of auditing services as the number of auditing hours billed and the price of auditing services as the hourly fee. We assert that an increase in the quantity of auditing services purchased reduces the likelihood of an accounting error because auditors exert more effort verifying the accuracy of accounting records. We present empirical evidence that a demand-induced increase in audit fees is associated with syndicated loans with lower interest rate spreads and shorter maturity lengths, which we interpret as evidence consistent with the assertion that these audit fee increases reduce credit-risk and asymmetric information problems. We empirically identify an increase in the demand for auditing services with instrumental variables that are intended to capture shifts in the demand curve for auditing services, rather than shifts in the supply curve for auditing services. In addition, we find that audit fees are positively associated with the number of lenders in loan syndicates, but are unable to attribute this association to an increase in the demand for auditing services
Thesis (PhD) — Boston College, 2009
Submitted to: Boston College. Graduate School of Arts and Sciences
Discipline: Economics

Thesis advisor: Fabio Schiantarelli
It is often argued that monetary instability reduces the informational content of market signals and thereby hinders the efficient allocation of investment. Essay I uses a signal extraction framework to give empirical content to this idea. In particular, we show why this framework predicts that, as monetary uncertainty decreases, the cross-sectional distribution of investment widens. We then explore this hypothesis using panel data information for UK companies over twenty years and receive support from the data. Essay II investigates whether the Istanbul Bourse is efficient or not. To carry out the investigation, the paper applies Johansen's cointegration technique to twelve asset prices from the Istanbul Bourse along with the exchange rate between the U.S. Dollar and the Turkish Lira. The results of these tests suggest that investors in the Istanbul Bourse do not seem to consistently reap abnormal profits by being able to predict future prices. Although asset prices seem to move together in the long run, the use of ECM fails to improve forecasts over univariate martingale predictions. Although the existence of international trade in similar products has captured the attention of trade theorists over the last two decades, it has not been incorporated into models of investment. Essay III develops a Tobin's Q model of capital investment with a purpose to explain the investment decision rule of a firm operating in both domestic and foreign output markets in competition with a foreign rival. Empirical results provide support for the model's predictions
Thesis (PhD) — Boston College, 1997
Submitted to: Boston College. Graduate School of Arts and Sciences
Discipline: Economics

This thesis provides three essays in macroeconomics. The first chapter analyzes trends in fertility and time allocation. Falling fertility rates have often been linked to rising female wages. However, over the last 30 years the US total fertility rate has been stable while female wages have continued to grow. Over the same period, women's hours spent on housework have declined, but men's have increased. A model with a shrinking gender wage gap is proposed capturing these trends. While rising relative wages increase women's labour supply, they also lead to a reallocation of home production from women to men, and a higher use of labour-saving inputs. Both are important in understanding why fertility did not decline further. The second chapter presents a life-cycle model with heterogeneous households and incomplete financial markets to study the implications of a reform that eliminates capital taxation. In the economy individuals differ in terms of their gender and marital status, and decision making within the couple is modelled as a contract under limited commitment. When capital taxes are set to zero, there is a strong increase in wealth accumulation that originates in dual earner households. Moreover, the policy change has important implications for the division of resources within the family and for households' insurance possibilities. The third chapter is motivated by the dramatic reshuffling in relative positions between East Asian and Latin American economies. It studies the dynamic response of a two- sector, manufacturing and agriculture, economy in the presence of import tariffs and export subsidies on manufacturing goods, similar to those that characterized government policy in these countries. It is shown that the response to these policies depends on the level of productivity in the agricultural sector. Quantitative work, however, finds that differences in agricultural productivities themselves are key in explaining the differential growth experiences.

This thesis consists of three self-contained chapters. In the first chapter, I present analytical expressions for fiscal multipliers under the Fiscal Theory of the Price Level. In the associated 'fiscal regime', taxation multipliers turn positive, while the government spending multiplier has the same functional form as its counterpart in the 'monetary regime', augmented by a nominal wealth effect. As a result, fiscal multipliers tend to be larger in the fiscal regime, with the degree of price stickiness being a key determinant of their exact sizes. I also analyze the effectiveness of money-financed fiscal stimulus. In the fiscal regime, money-financed stimulus is equivalent to a particular form of debt-financed stimulus. The effectiveness of money-financed stimulus in raising output (relative to in inflation) decreases as monetary policy becomes more responsive to inflation. In the second chapter, I analytically study the effects on economic activity from expected changes to future fiscal variables. I document four transmission mechanisms, the sizes of which depend crucially on the level of nominal rigidities. In general, news shocks to fiscal policy produce larger effects when the policy rate is unresponsive to inflation and when the fiscal authority has the power to issue unbacked nominal debt. Within this framework, I show that 'forward guidance' of fiscal policy can expand economic activity without ever increasing the real value of government debt. In the third chapter, I use the falling relative price of investment to explain the growing divergence between gross and net asset positions in the U.S. A lower investment price leads shadow banks to increase their borrowing and lending (i.e. gross balance sheet) to profit from better investment returns. Although more investment increases the capital stock, a lower investment price also lowers the replacement cost and, by extension, the per-unit market value of capital. Net asset positions remain, as a result, relatively unchanged. I present a stylized model that accounts for these facts.

Doutoramento em Economia
This thesis has as its object of study the way consumer preferences affect structure and market power, measured through the markups of the firms that compete in it. By modifying the way consumer preferences are defined, it is possible to generate endogenous markups that significantly alter the responses of macroeconomic variables generated by different shocks. The thesis consists of three essays, the first of which analyzes the dynamics of markups in durable and nondurable consumption over the economic cycle and their response to shocks. For this, I take a New Keynesian model with durable goods and modified to include the habit formation at both types of goods. Depending on how the habit formation over durable consumption is defined, the model is able to replicate the responses of consumption variables, markups and prices observed in the data.The second essay deals with the effort made by consumers to compare prices between various sellers over the economic cycle. From microdata for the US, it is shown that increases in individuals’ hourly compensation translate into reductions in time spent comparing prices. From this, a mechanism is presented to generate countercyclical responses of the time spent in price comparison by consumers. When incorporated into general equilibrium models, this mechanism is capable of generating an amplifying effect on the responses of the main macroeconomic variables. Finally, a general equilibrium model is presented where the number of firms, varieties and quality of the consumed products are determined endogenously. Through the model, it is possible to analyze the dynamics of product creation and destruction, as well as the changes in their quality during the economic cycle, and their impact on the dynamics of the main macroeconomic variables.
Esta tese tem como objeto de estudo a forma como as preferências dos consumidores afetam a estrutura e o poder de mercado, medido através de markups, das empresas que nele concorrem. Modificando a forma como são definidas as preferências dos consumidores, é possível gerar markups endógenos e alterar significativamente as respostas de variáveis macroeconómicas a diferentes choques. A tese é composta por três ensaios, sendo que no primeiro são analisadas as dinâmicas dos markups nos bens de consumo duradouros e não duradouros ao longo do ciclo económico e a sua resposta a choques. Para isso, é apresentado um modelo Novo-Keynesiano com bens duradouros e não duradouros, modificado de forma a incluir a formação de hábitos nos dois tipos de bens. Dependendo da forma como é definida a formação de hábitos de consumo de bens duradouros, o modelo permite replicar as respostas observadas para o consumo, markups e preços. O segundo ensaio aborda o esforço despendido pelos consumidores na comparação de preços ao longo do ciclo económico. Partindo de microdados para os EUA, demonstro que aumentos da remuneração horária dos indivíduos traduzem-se em reduções no tempo despendido na comparação de preços. Em seguida, é apresentado um mecanismo capaz de gerar respostas contracíclicas do tempo despendido pelos consumidores na comparação de preços. Quando incorporado em modelos DSGE, é capaz de gerar um efeito amplificador das repostas das principais variáveis dos modelos. Por fim, é apresentado um modelo DSGE onde o número de empresas e a qualidade dos produtos consumidos são determinados de forma endógena. Através do modelo, é possível analisar as dinâmicas de criação e destruição de variedades, bem como das variações na sua qualidade durante o ciclo económico, e o seu impacto na dinâmica das principais variáveis macroeconómicas.
info:eu-repo/semantics/publishedVersion

This thesis consists of three chapters on topics in Macroeconometrics. Chapter 1 develops a hypothesis test to evaluate economic models and their forecasts robust to instabilities. The test is particularly powerful in the presence of multiple breaks and can be applied to in-sample and out-of-sample moment conditions. An application to predictability of the U.S. equity premium provides evidence in favour of “predictability pockets”. Chapter 2 investigates the evolution of the Federal Reserve information advantage and the information channel of U.S. monetary policy. It provides evidence that the information channel is historically relevant, but finds substantially weaker evidence of its presence in recent years, once instabilities are accounted for. Chapter 3 develops a semi-parametric approach to conduct inference in non-Gaussian SVAR models robust to “weak” non-Gaussianity. The method exploits non-Gaussianity when it is present, while yielding correct coverage regardless of the distribution of the structural errors. An application revisits U.S. labor supply and demand elasticities and highlights the limitations of using non-Gaussianity for identification.
Aquesta tesi consta de tres capítols sobre temes de macroeconometria. El capítol 1 desenvolupa una prova d’hipòtesi per avaluar els models econòmics i les seves previsions robustes a les inestabilitats. La prova és particularment potent en presència de trencaments múltiples i es pot aplicar a condicions de moment dins i fora de la mostra. Una aplicació a la predictabilitat de la prima de renda variable dels Estats Units proporciona evidències a favor de “bosses de predictibilitat”. El capítol 2 investiga l’evolució de l’avantatge informativa de la Reserva Federal i el canal d’informació de la política monetària dels Estats Units. Proporciona evidències que el canal d’informació és històricament rellevant, però troba proves substancialment més febles de la seva presència en els darrers anys, un cop es comptabilitzen les inestabilitats. El capítol 3 desenvolupa un enfocament semiparamètric per conduir la inferència en models SVAR no gaussians robustos a no gaussianitat “feble”. El mètode explota la no-gaussianitat quan hi és present mentre proporciona una cobertura correcta independentment de la distribució dels errors estructurals. Una aplicació revisa les elasticitats de la oferta i la demanda de mà d’obra dels Estats Units i posa de manifest les limitacions de l’ús del no gaussianisme per a la identificació.

Broadly, the first two chapters analyse two novel sources of economic fluctuations, and the last chapter quantifies how the traditional monetary policy tradeoffs is affected by a mandate to stabilise financial variables. The first chapter focuses on the macroeconomic effects by variations in the range of available goods produced. Previous work that analysed the real effects of financial shocks only considered the effect on the production of existing goods. Firms can also invest into production lines of new goods. A credit contraction reduce investment into new products, leading to lower competition and higher markups. This decreases consumption demand, as well as lowering labour demand and wages, reducing household income. This amplifies the response of consumption to financial shocks (19% more volatile). The DSGE model is able to match the VAR impulse responses on the predicted channels. The second chapter resurrects the question if improved business practices contributed to the Great Moderation. While previous studies only examine inventory management, we analyse the role of supply chain management on enhancing production coordination across firms. VAR counterfactuals suggest that improved business practices have dampened order volatility by 40-50%. We therefore determine that better business practices contributed a significant 20-25% of the Great Moderation. The third chapter shows how a policy of ‘leaning against the wind’ affects the traditional monetary policy tradeoff. An estimated, modified Gertler and Karadi (2011) model is used to compute optimal monetary policy under commitment for a range of central bank objectives. The main findings are that increased regard for financial variables: (a) makes price stability increasingly costly in terms of output stabilisation; (b) raises the cost of output and inflation volatility, in reducing financial volatility; (c) depend crucially on the underlying disturbance, and on the financial variable that policy aims to stabilise.

Thesis advisor: Ryan A. Chahrour
The dissertation studies the primary sources of business-cycle fluctuations and their interaction with uncertainty and financial frictions. In my work, I examine the degree to which changes in uncertainty and financial conditions can be independent drivers of economic fluctuations; I study the sources of boom-bust cycles and whether they are linkedto credit market sentiments; and I ask how financial frictions affect economic fluctuations in terms of prices and quantities. In "Financial and Uncertainty Shocks", I separately identify financial and uncertainty shocks using a novel SVAR procedure and discuss their distinct monetary policy implications. The procedure relies on the qualitatively different responses of corporate cash holdings: after a financial shock, firms draw down their cash reserves as they lose access to external finance, while uncertainty shocks drive up cash holdings for precautionary reasons. Although both financial and uncertainty shocks are contractionary, my results show that the former are inflationary while the latter generate deflation. I rationalize this pattern in a New-Keynesian model: after a financial shock, firms increase prices to raise current liquidity; after an uncertainty shock, firms cut prices in response to falling demand. These distinct channels have stark monetary policy implications: conditional on uncertainty shocks the divine coincidence applies, while in case of financial shocks the central bank can stabilize inflation only at the cost of more unstable output fluctuations. In "What are the Sources of Boom-Bust Cycles?", joint with Vito Cormun, we provide a synthesis of two major views on economic fluctuations. One view maintains that expansions and recessions arise from the interchange of positive and negative persistent exogenous shocks to fundamentals. This is the conventional view that gave rise to the profusion of shocks used in modern dynamic stochastic general equilibrium models. In contrast, a second view, which we call the endogenous cycles view, holds that business cycle fluctuations are due to forces that are internal to the economy and that endogenously favor recurrent periods of boom followed by a bust. In this environment, cycles can occur after small perturbations of the long run equilibrium. We find empirical evidence pointing at the coexistence of both views. In particular, we find that the cyclical behaviour of economic aggregates is due in part to strong internal mechanisms that generate boom-bust phenomena in response to small changes in expectations, and in part to the interchange of positive and negative persistent fundamental shocks. Motivated by our findings, we build a theory that unifies the dominant paradigm with the endogenous cycles approach. Our theory suggests that recessions and expansions are intimately related phenomena, and that understanding the nature of an expansion, whether it is driven by fundamentals or by beliefs, is a first order issue for policy makers whose mandate is to limit the occurrance of inefficient economic fluctuations. In "COVID-19 and Credit Constraints'', joint with Pierluigi Balduzzi, Emanuele Brancati, and Fabio Schiantarelli, we investigate the economic effects of the COVID-19 pandemic and the role played by credit constraints in the transmission mechanism, using a novel survey of expectations and plans of Italian firms, taken just before and after the outbreak. Most firms revise downward their expectations for sales, orders, employment, and investment, while prices are expected to increase at a faster rate, with geographical and sectoral heterogeneity in the size of the effects. Credit constraints amplify the effects on factor demand and sales of the COVID-19 generated shocks. Credit-constrained firms also expect to charge higher prices, relative to unconstrained firms. The search for and availability of liquidity is a key determinant of firms' plans. Finally, both supply and demand shocks play a role in shaping firms' expectations and plans, with supply shocks being slightly more important in the aggregate
Thesis (PhD) — Boston College, 2021
Submitted to: Boston College. Graduate School of Arts and Sciences
Discipline: Economics

Le premier chapitre de cette thèse fait le constat que dans les économies avancées, la part agrégée des profits dans la valeur ajoutée augmente lorsque la concentration sectorielle augmente, mais que cela s'accompagne paradoxalement d'une translation vers de plus faibles valeurs de la distribution des profits par entreprise. Une intensification de la concurrence dans une économie où la dispersion des productivités est élevée rend compte de ce fait, ainsi que du ralentissement de l'activité économique et de la baisse du taux d'intérêt réel.Le second chapitre de cette thèse estime le taux de marque de chaque entreprise en France depuis 1966 et montre que la concentration sectorielle mesurée par la part des plus grandes entreprises dans le chiffres d'affaires total a en moyenne augmenté au court des dernières décennies, tandis que l'apparente stabilité de la part du travail agrégée cache en réalité deux évolutions contraires : une hausse au sein de l'entreprise moyenne, et une réallocation des parts de marché vers les entreprises à faible part du travail. La hausse de la concentration a ainsi été accompagnée d'une baisse du pouvoir de marché de l'entreprise moyenne.Le troisième chapitre concilie les faits rencontrés dans les deux précédents et explore le rôle des technologies de l'information (TIC), en montrant qu'il existe un lien causal positif et significatif de la taille des entreprises vers leur demande relative en TIC. La baisse des prix des TIC a donc bénéficié principalement aux grandes entreprises en les aidant à dépasser les contraintes d’organisation liées à leur taille. Un modèle d'équilibre général calibré sur les données françaises montre que ce phénomène explique la moitié de la hausse de la concentration et de la contribution négative de la réallocation à la part du travail agrégée.Enfin, le quatrième chapitre montre qu'en union monétaire, les effets négatifs d'une expansion budgétaire dans une région sur l'économie de ses voisins disparaissent lorsque la politique monétaire est contrainte par la limite de taux zéro (LTZ). En postulant une fonction d'objectif des décideurs publics régionaux prenant en compte l'écart de production et la dette, les comportements stratégiques changent à la LTZ, et bien que la coordination reste bénéfique à tous, ses gains sont plus faibles
The first chapter of this dissertation documents the fact that the aggregate profit share of value added increases with industry concentration in advanced economies, but that paradoxically this translates into a shift towards lower values of the distribution of firm-level profits. An increase in competition in an economy where the dispersion of productivities is high exhibits such result, as well as a decrease of the rate of economic growth and real interest rate.The second chapter provides estimations of firm-level markup in France since 1966 and shows that industry concentration proxied by the top firms share of sales has increased on average across industries over the last decades, while the apparent stability of the aggregate labor share hides in reality two offsetting evolutions: an increase within the typical firm, and a reallocation of market shares towards low-labor-share firms. The rise in concentration has therefore been accompanied by a decrease of firms' market power.The third chapter reconciles the facts discovered in the two previous chapters dans explores the role of Information Technology (IT) by proving that there exists a positive and significant causal link from the size of firms to their relative demand of IT inputs. The fall in the price of IT has therefore disproportionately benefited large firms by helping them deal with organizational limits to scale. A general equilibrium model calibrated on French data shows that this mechanism explains half of the rise in concentration and of the negative contribution of reallocation to the aggregate labor share.Finally, the fourth chapter shows that in a monetary union, the negative spillovers from fiscal expansion in one region on the economy to the neighbours disappear when monetary policy becomes constrained by the Zero-Lower-Bound (ZLB). Assuming that regional policy makers care about the output gap and debt, strategic behaviours change at the ZLB, and while coordination remains beneficial to all, its gains are lower

Thesis advisor: Susanto Basu
My dissertation consists of three independent chapters analyzing parameter estimation and structural change in applied macroeconomics. A first theme linking these papers is structural change, especially as it relates to the monetary policy transmission mechanism through the Phillips curve. A second theme is an assessment of small-sample statistical inference for impulse response functions after estimating macroeconomic models. Two of my chapters provide simulation studies of statistical coverage of standard test statistics after estimating impulse response functions in both atheoretical (local projection) and highly structural (dynamic stochastic general equilibrium) models. The first chapter of my dissertation, ``Using Survey Expectations to Estimate the New Keynesian Phillips Curve,'' provides new estimates of the parameters in the New Keynesian Phillips Curve, exploiting survey based expectations data provided by the Survey of Professional Forecasters and the Michigan Survey of Consumers. I find that the use of survey expectations in US data improves the fit of the textbook Phillips Curve model to the data and provides economically sensible estimates of its coefficients. The estimated model provides stable parameter estimates until the Great Recession, after which inflation becomes less dependent on marginal cost. Household and professional forecasts each contribute to the forward-looking component of inflation expectations, with household forecasts given more weight. The second chapter of my dissertation, ``Estimating Structural Breaks in Impulse Response Functions via the Local Projection Estimator,'' proposes an estimator for parameter instability in impulse response functions that are estimated by local projections. I use the estimator to investigate the presence of parameter instability in the Romer--Romer monetary policy shocks. I find evidence of a structural break in the impulse response coefficients in the late 1970s. In the early period, there is strong evidence that monetary policy shocks have real effects. There is little evidence that monetary policy shocks have real effects in the later period. Tax and oil price shocks exhibit little change in their effects on output throughout the postwar period. The third chapter of my dissertation, ``Standard Errors for Impulse Response Functions of Estimated DSGE Models,'' provides a method for constructing appropriate asymptotic standard errors for impulse responses of estimated dynamic stochastic general equilibrium models. The method requires only the matrices characterizing the model solution, the derivatives of those matrices with respect to the underlying structural parameters, and the covariance estimate of the structural parameters themselves. I provide simulation evidence on the small-sample properties of these standard errors
Thesis (PhD) — Boston College, 2020
Submitted to: Boston College. Graduate School of Arts and Sciences
Discipline: Economics

Thesis advisor: Ryan Chahrour
The dissertation studies the sources of business cycles taking both an open and a closed economy perspective. A common feature of the two chapters composing the dissertation is the use of simple, but powerful classifications and identifications of sources of business cycles. In particular, the first chapter, titled “What are the Sources of Boom-Bust Cycles?”, concerns the distinction between economic fluctuations due to changes in beliefs, and fluctuations due to changes in fundamentals, showing results that challenge traditional approaches to modeling business cycles. The second chapter, titled “Shocks and Exchange Rates in Small Open Economies”, takes the perspective of small open economies, and concerns the distinc- tion between global and domestic shocks, showing results that are informative for a series of puzzling facts concerning the dynamics of the exchange rate. In “What are the Sources of Boom-Bust Cycles?,” joint with Marco Brianti, we provide a synthesis of two major views on economic fluctuations. One view maintains that expansions and recessions arise from the interchange of positive and negative persistent exogenous shocks to fundamentals. This is the conventional view that gave rise to the profusion of shocks used in modern dynamic stochastic general equilibrium models. In contrast, a second view, which we call the endogenous cycles view, holds that business cycle fluctuations are due to forces that are internal to the economy and that endogenously favor recurrent periods of boom followed by a bust. In this environment, cycles can occur after small perturba- tions of the long run equilibrium. We find empirical evidence pointing at the coexistence of both views. In particular, we find that the cyclical behaviour of economic aggregates is due in part to strong internal mechanisms that generate boom-bust phenomena in response to small changes in expectations, and in part to the interchange of positive and negative persistent fundamental shocks. Motivated by our findings, we build a theory that unifies the dominant paradigm with the endogenous cycles approach. Our theory suggests that recessions and expansions are intimately related phenomena, and that understanding the nature of an expansion, whether it is driven by fundamentals or by beliefs, is a first order issue for policy makers whose mandate is to limit the occurrance of inefficient economic fluctuations. In “Shocks and Exchange Rates in Small Open Economies,” joint with Pierre De Leo, we propose a novel approach to separately identify domestic and external shocks in small open economies. Our results provide guidance about the transmission mechanism of these shocks and revisit recent conclusions drawn on the exchange rate effects of monetary policy in small open economies. The identification method is based on the premise that shocks originating from within a small economy should not influence world variables at any horizon, while external (or global) shocks should affect world variables at least at some horizon. We obtain three empirically related findings. First, external shocks feature large deviations from uncovered interest parity, while domestic shocks do not. Second, external shocks strongly comove with global risk aversion and U.S. macroeconomic variables. Third, recent puzzling estimates of the exchange rate effects of monetary policy stem from an identification of domestic shocks that fails to properly account for international spillovers. We show that a two-country small open economy model with international asset market imperfections is consistent with these facts. In our proposed model, global risk aversion shocks drive exchange rate dynamics, and a country’s net foreign asset position governs their international transmission. We provide empirical evidence that a country’s exposure to external shocks indeed depends on its net foreign asset position
Thesis (PhD) — Boston College, 2020
Submitted to: Boston College. Graduate School of Arts and Sciences
Discipline: Economics

Economists have thought very deeply about why productivity varies across firms and across countries. Complementary to this are the industry projects published by consultancy firms which identify several frictions faced by firms in developing countries. These frictions generate misallocation, as resources (like capital, labor) are not directed to the most productive firms of the economy. In my dissertation, I focus on analyzing the adverse effects of capital, labor market and behavioral frictions on firm/entrepreneurial growth and welfare. I use both a quantitative model-based approach and firm-level data from a large, developing country to understand this theory deeper. Through my research, I show that corporate diversification strategies, overborrowing are adequate mechanisms to reduce the effect of these frictions.

This dissertation focuses on three prominent areas of macroeconomic policy: fiscal stimulus, bail-outs and industrial policy, and monetary policy. In each case, I analyze the nature of the problem without intervention first before turning to why and how policy can be used to improve outcomes. In the first chapter, I study how relative demand shocks for different goods and services propagate through the economy to affect aggregate employment – and I use these insights to show how fiscal stimulus should be designed to achieve the greatest bang for buck in terms of employment. In the second chapter, I study how firm entry and exit in one industry can affect other industries and the economy as a whole through input-output relationships. I characterize which firms and industries are systemically important, show that the equilibrium is generically inefficient, and study when and how bailouts can be used to improve welfare. In the final paper, I provide a new microfoundation for downward wage rigidity, show that this microfoundation yields predictions that are consistent with the data, and study how monetary policy should behave given this microfoundation.
Economics

The thesis contains three chapters. The first chapter studies optimal fiscal policy in a small open economy in the presence of sovereign default risk. In particular, it studies this topic in an environment characterized by asymmetric information where financial markets (lenders) do not have enough information about the creditworthiness of the government (borrower). The chapter investigates whether the asymmetric information environment justifies the implementation of fiscal austerity during a recession, as opposed to the standard countercyclical response. The main finding is that fiscal austerity is the optimal fiscal policy during a recession. Fiscal austerity, although detrimental to economic growth, benefits the economy providing a signal to financial markets about the creditworthiness of the government and reducing borrowing costs. When the inherited government debt-to-GDP ratio is high, this beneficial effect of fiscal austerity outweighs the costs of the policy even when fiscal austerity has a strong negative impact on economic activity, i.e. when the fiscal multiplier is larger than one. The findings of this chapter are useful to shed new light on the fiscal policy developments across Europe during the European debt crisis. The second chapter of the thesis, co-authored with Maria Grazia Attinasi (ECB), studies empirically the effect of fiscal consolidation on the debt-to-GDP ratio for the Euro area countries, using a quarterly panel fiscal VAR. The main finding of this chapter is that following a fiscal consolidation episode, the debt-to-GDP ratio increases initially, for a period up to four quarters, and then starts to decline. The size and length of the initial debt increase depend on the composition of consolidation. In the case of revenue-based consolidations the increase in the debt-to-GDP ratio tends to be larger and to last longer than in the case of spending-based consolidations. The composition also matters for the long term effects of fiscal consolidations. Spending-based consolidations tend to generate a durable reduction of the debt-to-GDP ratio compared to the pre-shock level, whereas revenue-based consolidations do not produce any lasting improvement in the sustainability prospects as the debt-to-GDP ratio tends to revert to the pre-shock level. The findings of this chapter are of particular policy relevance in the context of the ongoing debate about the merits of fiscal consolidation as the main tool to restore debt sustainability in the Euro area countries. They suggest that short term considerations related to the detrimental impact of consolidation on growth and on the debt-to-GDP ratio need to be weighed against the long term benefits of a rebound in output growth and a durable reduction in the debt-to-GDP ratio. The third chapter, co-authored with Daniela Bragoli (Catholic University) and Michele Modugno (Federal Reserve Board), compares the forecasting performance of GDP now-casting techniques through a dynamic factor model to the forecasts produced by the Central Bank of Brazil, which is the only central bank that collects predictions at a daily frequency. Results indicate that the Central Bank of Brazil forecasts perform as well as model based forecasts. The latter finding suggests that, on the one hand, judgemental forecasters do not have computational limitations and they are able to incorporate quickly new information in a way that is almost as efficient as a machine. On the other hand, it shows that a linear time invariant model does a slightly better job in now-casting Brazilian GDP and hence that eventual non linearities, time variations and soft information that could be incorporated by judgement, do not provide new important information.

This thesis contains four chapters. The first chapter establishes a negative empirical correlation between the share of employees working under a temporary contract and the share of employees with high educational attainments employed in jobs for which they are overqualified. Subsequently, I show that a search and matching model with heterogeneous jobs and workers with directed search can explain this correlation. Temporary contracts induce entrepreneurs to post, in relative terms, more vacancies for jobs with low educational requirements thus reducing the time (cost) of finding one such job. As a result, some unemployed agents with high educational levels that were previously looking for a job that matched their level of formation may find it attractive to switch and start searching for one such easy to find job for which they are over-qualified. The second chapter compares the magnitude of fiscal multipliers at the zero lower bound in New Keynesian models with those that arise from a large-scale global semi-structural model (NiGEM). I find that, in NiGEM, once I impose the zero lower bound constraint, multipliers increase, as the literature predicts, but by a much smaller factor than in New Keynesian models. Whereas New Keynesian models predict multipliers well above one, or even larger than two, multipliers in NiGEM remain below one. All of the channels, highlighted by the literature, through which the zero lower bound operates to generate multipliers larger than one are operating in NiGEM but one. Contrary to the predictions of open economy New Keynesian models, a fiscal expansionary shock when the economy is stuck at the zero lower bound does not crowd in foreign demand for home goods in NiGEM. In addition, I also find that the results are sensitive to the degree of expectational myopia. Once I modify NiGEM to reduce the degree of expectational myopia and produce a foreign demand crowd in effect, I obtain that the predictions of the model become more in line with those of the New Keynesian literature. The third chapter describes the cyclical behavior of the relative price of investment using three different measures: instantaneous correlations on data detrended using the HodrickPrescott filter, correlations on VAR forecast errors and instantaneous correlations on frequencydomain filtered data. All three measures suggest that the relative price of equipment goods is countercyclical. Instead, the relative price of household and total private investment is countercyclical according to the correlations computed on VAR forecast errors and frequencydomain filtered data while correlations on data detrended using the Hodrick-Prescott filter suggest that the relative price of household and total private investment is procyclical. The fourth chapter reviews the theoretical and empirical literature on macroprudential policies and tools and tests empirically the effectiveness of several macroprudential policies and tools. We find evidence that macroprudential polices are effective at curbing house price and credit growth, albeit some tools are more effective than others. These include, in particular, taxes on financial institutions and strict loan-to-value and debt-to-income ratio limits.

Thesis advisor: Susanto Basu
Thesis advisor: Ryan Chahrour
This dissertation consists of three independent chapters analyzing the sources of business cycles and the role of monetary policy. Taking both closed- and open-economy perspectives, I study the importance of expectations for the empirical identification of economic and policy shocks, the nature of business cycle fluctuations, and the optimal conduct of monetary policy. The first chapter is titled ``International Spillovers and the Exchange Rate Channel of Monetary Policy,'' and is joint work with Vito Cormun. Motivated by the observation that exchange rate fluctuations largely influence small open economies, we propose a novel approach to separately identify the effects of domestic and external shocks on exchange rates and other macroeconomic variables, thereby uncovering a set of new empirical findings. A first finding is that external shocks account for most of exchange rate fluctuations. Relatedly, the bulk of external shocks is strongly correlated with measures of global risk aversion and uncertainty (e.g. the VIX), and a country’s net foreign asset position largely explains the exposure of its exchange rate to external disturbances. A second finding is that domestic and external disturbances generate very different comovement patterns between interest rates and exchange rates. In particular, unlike domestic shocks, external shocks are associated with large and significant deviations from uncovered interest parity. As a result, an econometrician that fails to properly distinguish between sources of exchange rate fluctuations is bound to obtain puzzling estimates of the exchange rate effects of domestic monetary policy shocks. These empirical findings have profound implications for models of small open economy and exchange rate determination. In particular, they favor theories in which exchange rates are jointly determined by the risk-bearing capacity in financial markets as well as the extent of a country’s financial imbalances. For this reason, we develop a model of the international financial sector that satisfies these features, and embed it in an otherwise standard general equilibrium two-country small open economy model. The key mechanism of the model consists of risk averse traders in the foreign exchange markets that require a premium to hold the currency risk of the small open economy. We show that the proposed model is able to reproduce all the empirical findings documented in the empirical analysis, including the cross-country differences in exposure to external shocks, the role of a country’s net foreign asset position, the different responses of interest rates, exchange rates, and currency excess returns across different shocks, as well as the emergence and resolution of the so-called exchange rate response puzzle across different identification approaches. The second chapter is titled ``Should Central Banks Target Investment Prices?'' and is joint work with Susanto Basu. The question posed in the title is motivated by the observation that central banks nearly always state explicit or implicit inflation targets in terms of consumer price inflation. To address the question, we develop an otherwise standard dynamic general equilibrium model with two production sectors. One sector produces consumption goods, while the other produces investment goods. In this context, we show that if there are nominal rigidities in the pricing of both consumption and investment goods and if the shocks to the two sectors are not identical, then monetary policy faces a tradeoff between targeting consumption price inflation and investment price inflation. In a model calibrated to replicate the estimated processes of sectoral total factor productivities as well as a set of unconditional business cycle moments, ignoring investment prices typically leads to substantial welfare losses because the intertemporal elasticity of substitution in investment is much higher than in consumption. Based on the model's predictions, we argue that a shift in monetary policy to targeting a weighted average of consumer and investment price inflation may produce significant welfare gains, although this would constitute a major change in current central banking practice. The third chapter is titled ``Information Acquisition and Self-Fulfilling Business Cycles,'' and is sole-authored work. To study the implications of imperfect information on economic fluctuations, I develop an otherwise standard Real Business Cycle model with endogenous information acquisition, which generates countecyclical firm-level uncertainty and endogenously procyclical productivity, as empirically documented in the literature. The main contribution of this chapter is the observation that this model displays aggregate increasing returns to scale and, potentially, an indeterminate dynamic equilibrium. In fact, an aggregate representation of the model is observationally equivalent to earlier theories of endogenous fluctuations based on increasing returns to scale, but its microeconomic foundations are consistent with empirically observed firm-level returns to scale. In a model calibrated to replicate a set of moments of the empirical distribution of firm-level productivity, self-fulfilling fluctuations are possible. In addition, a Bayesian estimation of the model suggests that non-fundamental shocks explain a significant fraction of aggregate fluctuations
Thesis (PhD) — Boston College, 2019
Submitted to: Boston College. Graduate School of Arts and Sciences
Discipline: Economics

The dissertation consists of four papers that aim at providing new contributions in the field of macroeconomics, monetary policy and financial stability. The first paper proposes a new Dynamic Stochastic General Equilibrium (DSGE) model with credit frictions and a banking sector to study the pro-cyclicality of credit and the role of different prudential regulatory frameworks in affecting business cycle fluctuations and in restoring macroeconomic and financial stability. The second paper develops a simple DSGE model capable of evaluating the effects of large purchases of treasuries by central banks. This theoretical framework is employed to evaluate the impact on yields and the macroeconomy of large purchases of medium- and long-term government bonds recently implemented in the US and UK. The third paper studies the effects of ECB communications about unconventional monetary policy operations on the perceived sovereign risk of Italy over the last five years. The empirical results are derived from both an event-study analysis and a GARCH model, which uses Italian long-term bond futures to disentangle expected from unexpected policy actions. The fourth paper proposes a DSGE model with an endogenous term structure of interest rates, which is able to replicate the stylized facts regarding the yield curve and the term premium in the US over the period 1987:3-2011:3, without compromising its ability to match macro dynamics.

The dissertation consists of four papers that aim at providing new contributions in the field of macroeconomics, monetary policy and financial stability. The first paper proposes a new Dynamic Stochastic General Equilibrium (DSGE) model with credit frictions and a banking sector to study the pro-cyclicality of credit and the role of different prudential regulatory frameworks in affecting business cycle fluctuations and in restoring macroeconomic and financial stability. The second paper develops a simple DSGE model capable of evaluating the effects of large purchases of treasuries by central banks. This theoretical framework is employed to evaluate the impact on yields and the macroeconomy of large purchases of medium- and long-term government bonds recently implemented in the US and UK. The third paper studies the effects of ECB communications about unconventional monetary policy operations on the perceived sovereign risk of Italy over the last five years. The empirical results are derived from both an event-study analysis and a GARCH model, which uses Italian long-term bond futures to disentangle expected from unexpected policy actions. The fourth paper proposes a DSGE model with an endogenous term structure of interest rates, which is able to replicate the stylized facts regarding the yield curve and the term premium in the US over the period 1987:3-2011:3, without compromising its ability to match macro dynamics.

Defence date: 23 October 2019
Examining Board: Prof. Ramon Marimon, European University Institute, (Supervisor); Prof. Juan Dolado, Universidad Carlos III; Prof. Gaetano Gaballo, HEC, Paris; Prof. Thomas Sampson, LSE
This thesis contains three chapters. The first two consider deviations from rational expectations for understanding the unprecedentedly long period of a binding zero lower bound (ZLB) since the Great Recession. There I show that if agents are adaptively learning, Central Banks can use forward guidance to guide them through the novel economic environment. In the third chapter I take a more long-run structural outlook to study the interplay of skills, technologies and complementarities for understanding differences in labour market outcomes across OECD countries. The first chapter studies the effects of forward guidance (FG) from a novel perspective. Instead of considering FG as a promise for future actions or providing better forecasting, the Central Bank (CB) in the model is giving a signal about its own reaction function. The CB uses FG as a communication device to signal a policy change. The main findings are that clear communication increases welfare compared to no communication, yet vague messages prove ineffective. The second chapter considers the ZLB as an informational curtain for adaptively learning agents as they cannot observe the path of the interest rate. In a model I show that this results in expectations disagreement between the agents and the CB, consistent with the data. The disagreement coupled with the learning of the agents results in explosive dynamics. Forward guidance is shown to restore stability at the ZLB by preventing spurious expectational drift. The third chapter studies the relationship between returns to skill and assortative matching. Using the PIAAC cognitive skills dataset I show that: returns to skill are systematically related to industrial sorting; high-skilled industries have more assortative matching of workers from all occupations; and more developed countries have less mismatch. I further build a model to illuminate the mechanism. I find that rich countries experience a trade-off of lower overall mismatch but higher crosssectoral mismatch, yet due to higher search frictions poorer ones end up being more mismatched overall.

Defence date: 10 June 2020 (Online)
Examining Board: Prof. Evi Pappa (EUI and University Carlos III of Madrid, Supervisor); Prof. Axelle Ferrière (Paris School of Economics); Prof. Jean Imbs (NYU Abu Dhabi and Paris School of Economics); Prof. Morten Ravn (University College London)
The first chapter uncovers a key interaction between government spending, demographics and productivity. I document that age is a key driver of consumption adjustment to government spending shocks, with significantly larger responses among young people, regardless of financial constraints. Further evidence reveals that productivity, wages and hours worked increase relatively more among young workers. I rationalize these findings with a life-cycle model where I introduce learning-bydoing. Young workers accumulate skills on-the-job at a fast rate, while the productivity of the prime-age remains stable. Then, by raising hours worked, a fiscal expansion can generate higher wage increases for young individuals, thus stimulating their consumption. The second chapter analyzes the heterogeneous effects of government spending shocks from a gender perspective. Men typically bear the brunt of recessions due to stronger cyclicality of their employment and wages relative to women's. We study the extent to which fiscal policy may offset or worsen these asymmetric effects across genders. We find that men are hurt or benefit less than women from increases in major government spending components. This result is largely driven by negative spillovers for men working in the private sector. Furthermore, fiscal expansions cannot reconcile both policy goals: offsetting inequitable business cycle effects and closing gender gaps. The third chapter uncovers the crucial role of the horizon in shaping the macroeconomic effects of news shocks, using a novel dataset on worldwide giant mineral discoveries. The median delay between the discovery of a mineral and its exploitation is about twice the delay reported for other commodity-discovery data considered in the literature so far, which allows to study longer-run news events. We find that macroeconomic responses to long-run discoveries are delayed. A news effect appears only two or three years before production starts, underlining an existing, but myopic, e ect of these discoveries on macroeconomic expectations.
-- 1. Fiscal stimulus and skill accumulation over the life cycle -- 2. From he-cession to she-stimulus? : the impact of fiscal policy on gender gaps -- 3. Short- and long-run news : evidence from giant mineral discoveries

Defence date: 03 May 2021
Examining Board: Professor Ramon Marimon (European University Institute); Professor Russell Cooper (European University Institute); Professor Stephanie Schmitt-Grohé (Columbia University); Professor Pedro Teles (Católica-Lisbon Business & Economics)
In the first two chapters of this thesis we analyze the impact of an increase in transfer payments - i.e., fiscal stimulus in a form of direct payments to individuals - on budget deficits. In the first chapter we study this issue theoretically and show that in a model with the cash-in-advance constraint on consumption and downward nominal wage rigidity the transfers multiplier is positive when the economy is below its full employment level. Increasing transfers in these circumstances relaxes the cash-in-advance constraint and effectively undoes the inefficiency caused by the wage rigidity. Since this results in higher income and consumption which are both taxed, the fiscal stimulus can possibly be self-financing - it pays for itself in a form of increased tax revenue. We also perform a quantitative analysis and show that under a plausible calibration of the model when the economy is far enough from the full employment, the transfer multipliers are large enough for the tax revenue to increase sufficiently so that the fiscal stimulus largely finances itself. In the second chapter we analyze the self-financing nature of transfer payments empirically and estimate the impulse response functions of GDP, unemployment, consumption and debt to an increase in transfer payments on quarterly data from 1959Q2 to 1991Q4 using the local projection method and exogenous transfers shocks. We show that the stimulus in a form of higher transfers has more pronounced effects when unemployment is high than when it is low. Permanent transfers seem not to affect debt, while temporary transfers are estimated to reduce it after an initial increase, especially in the high unemployment regime - an increase in temporary transfers seems to be not only self-financing, but actually reducing debt when the economy recovers. The third chapter is related to a different topic: we analyze how the terms of trade (TOT) - the ratio of export prices to import prices - affect total factor productivity (TFP). We provide empirical macroeconomic evidence based on the times series SVAR analysis and microeconomic evidence based on industry level data which shows that the terms of trade improvements are associated with a slowdown in the total factor productivity growth. Next, we build a theoretical model in which terms of trade improvement results in putting more resources into physical goods production at the expense of the research and development (R&D) sector, which in turn has a negative impact on knowledge development.
-- Part 1 Self-financing transfers in a cash-in-advance economy with downward nominal wage rigidity -- 1.1 Introduction -- 1.2 Models -- 1.2.1 Benchmark model - competitive business cycle model with government -- 1.2.2 Downward rigid nominal wages -- 1.3 Policy implications -- 1.3.1 Multiplier -- 1.3.2 Laffer curve -- 1.3.3 Some pleasant fiscal algebra -- 1.3.4 Transfers ensuring full employment -- 1.3.5 Optimal Ramsey policy -- 1.3.6 Alternative fiscal policies -- 1.4 Quantitative analysis -- 1.4.1 Adding capital and capital taxes -- 1.4.2 Calibration -- 1.4.3 Experiments -- 1.4.4 Benchmark model -- 1.4.5 Downward rigid nominal wages -- 1.4.6 Downward rigid nominal wages with an increase in transfers -- 1.4.7 Quantitative results -- 1.4.8 Ramsey optimal policy -- 1.5 Conclusions -- 1.6 Appendix -- 1.6.1 Some pleasant fiscal algebra with capital -- 1.6.2 Results used in subsection 1.3.5 --1.6.3 Deriving the implementability constraint -- 2 What are the effects of higher transfer payments on debt? Are transfers self-financing? -- 2.1 Introduction -- 2.2 Data -- 2.3 Estimation methodology -- 2.4 Results -- 2.5 Conclusions -- 2.6 Appendix -- 2.6.1 Impulse response functions of transfers -- 2.6.2 Structural VAR analysis -- 3 Total factor productivity and the terms of trade -- 3.1 Introduction -- 3.2 Empirical evidence -- 3.2.1 Macroeconomic evidence -- 3.2.2 Microeconomic evidence -- 3.2.3 Evidence on the relationship between R&D and the terms of trade -- 3.3 Model -- 3.3.1 Households -- 3.3.2 Exportable goods producer -- 3.3.3 Technology producer -- 3.3.4 The main mechanism -- 3.3.5 Remaining elements of the model -- 3.4 Quantitative model evaluation -- 3.4.1 Functional forms -- 3.4.2 Calibration -- 3.4.3 Model responses -- 3.5 Conclusions -- 3.6 Appendix -- 3.6.1 Tables -- 3.6.2 Growth of the technology

Defence date: 22 June 2021
Examining Board: Professor Árpád Ábrahám (European University Institute and University of Bristol); Professor Philipp Kircher (Cornell University); Professor Dean Corbae (University of Wisconsin-Madison); Professor Giovanni Gallipoli (University of British Columbia)
In the U.S., 40% of students drop out of college. While dropout decisions may constitute an efficient response to students' discovering their low academic ability, they may be inefficient if an able student drops out due to adverse financial shocks. In my job market paper, `The Macroeconomic Cost of College Dropouts', I investigate whether the observed dropout rates generate inefficiency by decomposing driving forces behind dropouts. I provide empirical evidence that the probability of dropping out of college is strongly associated with both ability and finances, even after controlling for other factors. I build a quantitative general-equilibrium overlapping generations model, where individuals face incomplete information on their academic ability and uncertainty about the generosity of financial aid. The model simulations show that uncertainty regarding ability is responsible for 20% of the observed dropout rates, while uncertainty regarding financial aid explains up to 53%. Pursuing a policy that eliminates uncertainty about the college aid would increase the social welfare by as much as 2.3%, benefiting both college graduates and non-college graduates. Such a policy is largely self-financing due to endogenous improvements in skill allocation and associated growth in GDP. In my second project, `Education Affordability and Income Inequality' with F.Wang, we address the broad question of what explains the observed income inequality in the U.S. Different tax progressivity schedules are often named as the main factor that drive the difference in income inequality between the continental European countries and the U.S. (see Guvenen, Kuruscu, and Ozkan (2014), Holter (2015)). In this paper, we revisit the role of tax progressivity in shaping earnings inequality, taking into account another aspect that differs across these countries: the price of attaining a bachelor's degree. In the U.S., the price is much higher than in continental European countries. The OECD (2018) reports that the direct cost for students to attain a bachelor's degree constitutes $55000 in the U.S., while in Germany it amounts to $5000. Motivated by this observation, we study the role of education affordability in shaping earnings inequality in the context of an overlapping generations model where agents, heterogeneous in terms of learning ability, initial wealth, and productivity, decide whether to attend college, subject to borrowing constraints. After calibrating the model to the U.S. economy, we perform a number of counterfactual experiments. We find that the Gini coefficient for before-tax wage income would decrease by as much as 16:2 percent if the current education policy, the fraction of higher education costs borne by the U.S. government, were replaced with its German counterpart. On the other hand, we find that labor tax progressivity plays a less significant role in explaining earnings inequality. Besides, poor households with medium and medium-high abilities would benefit the most from this education reform. Apart from distributional gains, the hypothetical policy reform would also boost macroeconomic activities by increasing labor productivity. Finally, analyzing the transitional dynamics shows that every new generation would be better off in terms of utilitarian welfare if the current education policy was replaced with its German counterpart. In my third project, `Larger transfers financed with more progressive taxes? On the optimal design of taxes and transfers', co-authored with Axelle Ferriere, Gaston Navarro, Philipp Gr ubener, we focus on the interplay between the two most important tools governments have at their disposal to reduce inequality - the income tax schedule and targeted transfers. Specifically, we study the optimal joint design of targeted transfers and income taxes. Within a simple heterogeneous-household framework, we derive two analytical results. First, higher transfers reduce the degree of optimal income tax progressivity. Second, optimal transfers are positive under mild conditions on primitives. This is due to both efficiency and redistribution reasons. Large transfers increase the fiscal burden for the government. Lowering marginal tax rates at the top incentivizes labor supply, which helps the government to raise sufficient revenue. Also, having the transfer in place provides some redistribution, reducing the need for higher tax progressivity. We then quantify the optimal tax-and-transfer system in a richer incomplete-market model with a realistic wealth distribution and unemployment risk. The model features novel exible functional forms for progressive income taxes and means-tested transfers. Relative to the current U.S. fiscal system, our preliminary calibration suggests that the optimal policy consists of more generous means-tested transfers, which phase-out at a slower rate, together with less progressive income taxes.
-- Part 1. The Macroeconomic Cost of College Dropouts -- 1.1 Introduction -- 1.2 Empirical Analysis -- 1.3 The Model Economy -- 1.4 Calibration -- 1.5 Model Fit -- 1.6 Model Mechanism -- 1.7 Policy -- 1.8 Conclusions -- Part 2. Education Affordability and Earnings Inequality -- 2.1 Introduction -- 2.2 Relation to The Literature -- 2.3 The Model Economy -- 2.4 Calibration -- 2.5 Model Dynamics -- 2.6 Policy Experiments -- 2.7 Transitional Dynamics -- 2.8 Conclusion -- Part 3. Larger transfers financed with more progressive taxes? On the optimal design of taxes and transfers -- 3.1 Introduction -- 3.2 An Analytical Model -- 3.3 Quantitative Model -- 3.4 Conclusion

This thesis is composed of two self-contained chapters on macroeconomic impact of volatility shocks. Recently, there has been a surge in work on this subject which seeks to identify and establish how second-moment shocks can lead to sizable economic impact. In chapter 1 which is jointly written with Edgar Silgado-Gomez, we explore whether volatility shocks to spreads on bonds issued by peripheral eurozone economies of Spain, Ireland, Portugal and Italy was responsible for decline observed in these economies during the height of eurozone debt crisis and if it played a role in subsequent economic slowdown in these countries. Using SVAR-SV techniques, we are able to show that volatility shocks indeed had significant negative economic impact. In our study, a volatility shocks to the spread on sovereign bond is followed by a decline in bank net worth which precipitates a decline in banks' credit activities. As a lot of economic activity is dependent or at least supported by bank financing, these economic activities witness a fall. To explain the results we obtain from data. we use a medium size DSGE model augmented with a banking sector where banks hold government bonds and where the spreads on these bonds are subject to stochastically evolving second moment shocks. Consistent with what we see in our SVAR-SV analysis, a volatility shocks is followed by a drop in bank net worth and a reduction in its lending activity. This is then followed by a decline in investment, employment, output and consumption. Our findings underline the role that second moment shocks can play in affecting macroeconomic variables. In chapter 2, I show that financial frictions amplify and compound the effects of fiscal volatility shocks. Using a calibrated DSGE model where firms are constrained by the amount of capital they can raise to support their production, I demonstrate that negative impact of fiscal volatility shocks are a lot worse than they are without it. The key mechanism explaining our results is a higher surge in firm markup when financial frictions are present than in their absence. These results highlight the role of unhindered access to finance for supporting economic activities more so during the times where the economy is buffeted by more or larger than usual fiscal volatility shocks.

Abstract: Chapter one The aim of this paper is to examine the role of monetary and fiscal policies in explaining macroeconomic fluctuations in Ethiopia using a structural VAR approach, over the period 1997/1998:1 to 2016/17:4. Its mains results can be presented as follows: first, an increase in government spending has an expansionary effect on output, while an increase in tax revenue has a contractionary effect, with spending multipliers larger than net tax revenue multipliers; second, contractionary monetary policy is associated with a fall in output; third, monetary policy contributes to very small fluctuations in output and it is one of the responsible sources of the high and persistence inflation in the country; fourth, the contributions of fiscal policy shocks are larger than that of monetary policy shocks in explaining movements in output, with roughly equivalent contributions coming from shocks in fiscal policy components. Furthermore, the effects of fiscal and monetary policy shocks on output and inflation have improved qualitatively and quantitatively when both policy variables are jointly examined than estimating a separate model; suggesting the role of a joint analysis of fiscal and monetary policy shocks.
Abstract: Chapter two This paper explores the international spillovers of the U.S, the Euro Area (EA hereafter), Chinese and Japanese monetary policy shocks on a number of macroeconomic variables in 17 Emerging Market Economies (EMEs). After expansionary monetary policy in these four big economies, industrial production increases in typical emerging markets. These results are robust to most countries considered in the analysis over the sample period. The short-term interest rates also fall in the typical emerging markets regardless of where the shock is originated. However, the response of the real trade-weighted exchange rates in the typical emerging market economies is strong and short-lived after monetary expansion in the Euro Area, but persistent after monetary expansion from the U.S, Japan, and China. Moreover, the size of the responses of the industrial production in emerging Europe and Asia respond more to the monetary innovations in the Euro Area and China, respectively. There is also a substantial cross country heterogeneity in the responses of the macroeconomic aggregates in the emerging markets, where the size of the spillovers vary with the country-specific characteristics. Countries with higher trade openness and higher financial integration display stronger spillover in production as compared to other counterparts after the U.S. and the Japanese M3 innovations. Moreover, the degree of debt burden matters for the transmission of the U.S, the Euro Area and Japan monetary policy shocks and does not seem to matter for monetary expansions in China.

Orientador: Mario Augusto Bertella
Banca: Alexandre Sartoris Neto
Banca: Roseli da Silva
Resumo: A modelagem macroeconômica tem estado sob intenso escrutínio desde a Crise Financeira de 2007-2008, quando graves deficiências foram expostas na metodologia DSGE. Embora muitas dessas críticas tenham sido injustas ou desinformadas, elas enfatizaram a necessidade de considerar formas alternativas de modelagem macroeconômica e aprimorar abordagens estabelecidas, a fim de torná-las mais úteis para a compreensão de um mundo em recessão. Nesse sentido, argumentamos que explorar a diversidade na modelagem macroeconômica pode beneficiar a profissão e produzir resultados importantes em relação à formulação de políticas macroeconômicas. Uma maneira de explorar a diversidade na macroeconomia é investigar sistematicamente tanto os modelos DSGE quanto os modelos baseados em agentes, revelando suas forças e limitações relativas, e combinando essas duas abordagens diferentes, a fim de que possamos aprender uma com a outra e talvez produzir um modelo híbrido. Este trabalho dá o primeiro passo rumo a esse desafio. Acreditamos que uma abordagem interdisciplinar pode ajudar não só toda a agenda da pesquisa macroeconômica, mas também beneficiar a sociedade como um todo, permitindo a implementação de medidas políticas mais eficazes e aumentando a capacidade dos economistas em modelar a heterogeneidade social em um mundo complexo e em constante evolução.
Abstract: Macroeconomic modelling has been under intense scrutiny since the Financial Crisis of 2007-2008, when serious shortcomings were exposed in the DSGE methodology. Although many of these criticisms were unfair or uninformed, they did highlight the need of considering alternative forms of macroeconomic modelling and enhancing established approaches in order to make them more useful for understanding a world in recession. In this sense, we argue that exploiting diversity in macroeconomic modelling can benefit the profession and yield more fruitful developments regarding the formulation of macroeconomic policy. One way of exploring diversity in macroeconomics is by investigating systematically both the DSGE and the Agent-Based models, revealing their relative strengths and limitations, and combining these two different approaches, so that we can explore what one can learn from the other and perhaps yield a hybrid model. This work takes the first step towards this ultimate achievement. We believe that an interdisciplinary approach may help not only the entire macroeconomic research agenda, but also benefit society as a whole, allowing the implementation of more effective policy measures and by increasing the ability of economists to model social heterogeneity in a complex-evolving world.
Mestre

Orientador: Bruno Martarello De Conti
Tese (doutorado) - Universidade Estadual de Campinas, Instituto de Economia
Made available in DSpace on 2018-08-27T06:29:18Z (GMT). No. of bitstreams: 1 VanNoije_Paulo_D.pdf: 4388677 bytes, checksum: d0f5bf16ef493c4f8341d7146c487117 (MD5) Previous issue date: 2015
Resumo: As economias capitalistas apresentam, recorrentemente, situações em que nem todas as mercadorias são vendidas, aspecto que nem sempre é levado em conta pela teoria ortodoxa. O objetivo do trabalho é fazer uma análise teórica de macroeconomia dinâmica para ver o que gera esse problema e o que permite que ele seja contornado. Defende-se na tese que: i) não só a possibilidade de haver reserva de valor que gera esse problema, mas também o fato da produção distribuir um poder de compra menor do que o preço de oferta agregada, por conta do lucro, causando a necessidade de que ocorram gastos autônomos em relação ao poder de compra distribuído para que as duas variáveis ¿ preço de oferta agregada e poder de compra ¿ possam se igualar; ii) a realização econômica no sistema depende de um permanente crescimento dos passivos (e.g. crédito), com novos recursos sendo criados e direcionados para a circulação das mercadorias. Porém, a implicação direta da resolução do problema no período corrente é a ampliação do problema para os períodos seguintes, devido aos efeitos causados por essa solução nos balanços patrimoniais ¿ ativos e passivos. A metodologia utilizada partirá de uma revisão bibliográfica sobre o tema da realização econômica, passando para a construção de modelos teóricos simplificados, com o intuito de verificar em que circunstâncias ocorrem o problema da realização e, por fim, apresentará as características que aproximam a resolução desse problema, pelo sistema capitalista, ao mecanismo de funcionamento das pirâmides financeiras. Para tanto, essa pesquisa estudará não só os fluxos econômicos, como também os determinantes das decisões que envolvem os estoques financeiros e de riqueza
Abstract: Capitalist economies have, repeatedly, situations where not all the goods are sold, an aspect that is not always taken into account by the orthodox theory. The objective is to make a theoretical analysis of dynamic macroeconomics to see what generates this problem and allowing it to be bypassed. It is argued in the thesis that: i) not only the possibility of a store of value that generates this problem, but also the fact of production distribute less purchasing power than the aggregate offer price, on account of profit, causing need for autonomous spending to occur in relation to purchasing power distributed so that the two variables - aggregate offer price and purchasing power - can match; ii) the realization in the system depends on a constant increase in liabilities (eg credit), with new features being created and directed to the movement of goods. However, the direct implication of the resolution of the problem in the current period is the expansion of the problem for the following periods due to the effects caused by this solution in the balance sheet - assets and liabilities. The methodology start with a literature review on the topic of realization, reaching the construction of simplified theoretical models in order to ascertain under what circumstances occur the realization problem and finally present the characteristics approaching the resolution of this problem, by the capitalist system, as the operation mechanism of pyramids schemes. Therefore, this research will study not only the economic flows, as well as the determinants of decisions involving financial and wealth stocks
Doutorado
Teoria Economica
Doutor em Ciências Econômicas

Orientador: Eduardo Strachman
Resumo: O objetivo geral do presente estudo é examinar o comportamento dos maiores bancos comerciais no Brasil, em um contexto de expansão do crédito, para desenvolver uma compreensão mais profunda a respeito do setor bancário em uma economia monetária da produção. O objetivo específico é identificar padrões de comportamentos dos bancos comerciais brasileiros no período 2003 – 2010. A hipótese principal desta pesquisa é, o papel do sistema bancário como complexo, essencial e ativo na economia; ante um sistema passivo como um simples intermediador entre poupadores e investidores. Deste modo, parte-se da hipótese que a participação ativa do sistema bancário é fundamental na determinação do volume de financiamento do investimento. Este estudo, além de ajudar no aprofundamento da compreensão do papel fundamental que os bancos desempenham no estabelecimento das condições de financiamento e na determinação do nível de atividade econômica, deve ajudar no aprimoramento da discussão literária a respeito das relações bancos públicos e privados. Conclui-se que por causa da crise financeira, ficou evidente a importância da existência e atuação de um sistema bancário misto no Brasil, privado e público, para atuar de forma anticíclica quando a economia começar a desacelerar, de forma a sustentar a demanda por crédito das empresas produtivas em face da contração do crédito privado. Uma vez que por padrão os bancos privados possuem uma alta preferência por liquidez ao menor sinal de desaceleração da... (Resumo completo, clicar acesso eletrônico abaixo)
Abstract: The general objective of the present study is to examine the behavior of the largest commercial banks in Brazil, in a context of credit expansion, to develop a deeper perception of respect for the banking sector in a monetary production economy. The specific objective is to identify patterns of execution of commercial banks in the period 2003 - 2010. The main hypothesis of this research is, the role of the banking system as complex, essential and active in the economy; before a passive system as a simple intermediary between investors and investors. In this way, it is assumed that the active participation of the banking system is fundamental in determining the volume of investment financing. This study, in addition to helping to deepen the understanding of the fundamental role of banks that perform in the establishment of financing conditions and determines the level of economic activity, should help to improve literary discussion and respect public and public relations. He concluded that because of the financial crisis, it became evident the importance of action and a banking system in Brazil, private and public, to execute an anti-cyclical way when an economy started to slow down, in order to sustain a demand for credit from productive companies in the contraction private credit. Since the pattern of private banks has a high preference for liquidity and the slightest sign of a slowdown in the economy.
Mestre

Cette thèse est divisée en quatre essais sur le rôle de l'hétérogénéité en macroéconomie. Spécifiquement, j'étudie comment : (i) les effets de la taxation de la richesse dépendent des sources de l'inégalité de richesse, (ii) l'assurance chômage affecte la sélection dans l'entrepreneuriat, (iii) le marché des entreprises permet de transmettre la valeur intangible des entreprises entre les générations et les entrepreneurs, et (iv) le commerce international entre une multitude de pays participe au co-mouvement des PIBs entre ces pays. Dans mon premier chapitre, nous montrons avec mon coauteur Philipp Wangner que les implications de la redistribution de la richesse sur les agrégats macroéconomique et le bien-être dépendent des forces sous-jacentes aux décisions d'investissement et à l'inégalité de richesse. Dans les données, les ménages riches investissent une plus grande proportion de leur richesse dans des actifs risqués. Cette observation est le résultat de deux mécanismes. Les ménages riches peuvent être hétérogène en termes de compétence et de tolérance au risque (dépendance au type) ou parce que la richesse elle-même conduit à des comportements plus risqués (dépendance à la richesse). Premièrement, nous clarifions le rôle de la dépendance au type et à la richesse et montrons qu'une classe de modèle utilisé pour étudier les conséquences de l'hétérogénéité micro de l'investissement s'appuient sur une combinaison particulière de dépendance au type et à la richesse. Deuxièmement, nous montrons que leur distinction est cruciale pour évaluer les effets de la taxation sur la richesse. A l'aide d'un modèle quantitative en marchés incomplets calibrés sur des données microéconomiques aux USA, nous trouvons que les deux dépendances génèrent des résultats opposés sur l'effet de la taxation de la richesse. Dans un modèle de type-dependence, les individus riches avec des retours sur l'investissement faibles desépargnent plus rapidement que ceux qui obtiennent des retours sur l'investissement plus élevés. Par conséquent, en taxant le stock de richesse des plus riches, seuls les plus riches dans l'économie survivent au top de la distribution de la richesse, renforçant la sélection des agents avec des compétences d'investisseurs parmi les plus riches. Lorsque les retours sur l'investissement reflètent la productivité, taxer la richesse à un taux plus élevé est optimal parce qu'il accroît la productivité. Dans un modèle de dépendance à la richesse, une taxation sur la richesse réduit l'investissement productif, tel que subventionner la richesse devient optimal. Dans un modèle calibré pour prendre en compte les deux mécanismes, taxer positivement la richesse à 0.8% au delà d'un seuil d'exonération de 550K est optimal avec peu d'effets sur la productivité. Ce résultat est robuste si les retours élevés sur l'investissement représentent des rentes plutôt qu'une différence de productivité. Dans ce cas, l'argument inverse se produit. Il est optimal d'accroître la taxation sur la richesses lorsqu'il y a dépendance à la richesse, mais de décroître la taxe sur la richesse lorsqu'il y a dépendance au type, tel que les deux effets sur l'importance des rentes dans l'économie se neutralisent. Dans le second chapitre, nous étudions avec mon coauteur Sumudu Kankanamge comment l'entrepreneuriat contribuent aux flux du marché du travail au niveau macro et micro. Nous expliquons pourquoi la sélection dans ce type d'occupation est fortement sensible aux variations de l'assurance chômage. Notre cadre théorique combine les modèles de search dans l'esprit de Mortensen et co-auteurs (1994) avec les modèles d'entrepreneuriat dans la lignée de Quadrini (2000) et Cagetti and De Nardi (2006). Nous montrons que notre modèle réplique les faits stylisés principaux de flux entre les différentes occupations au niveau agrégé mais aussi le long de la distribution des revenus et de la richesse. Une assurance chômage plus élevée est associée avec un effet dissuasif fort [...]
This thesis is divided into four essays on the broad implication of heterogeneity in macroeconomics. It puts a special emphasis on (i) the relation between the sources of wealth inequality and the effects of wealth redistribution, (ii) the effects of unemployment insurance on the selection into self-employed, (iii) the role of the market for businesses in transmitting the intangible value of firms across generations of entrepreneurs, and (iv) the role of international trade linkages with many interconnected countries in generating cross-country GDP correlations. In my first chapter, together with Philipp Wangner, we show that the aggregate and welfare implications of redistributing wealth depends on the underlying forces behind capital investment and wealth inequality. In the data, rich households invest a higher fraction of their wealth into risky assets. This is the result of two distinct channels. Wealthy households may invest differently due to heterogeneity in specific skill or risk tolerance (type-dependence) or because wealth itself induces wealthy households to undertake riskier investments (scale-dependence). We first clarify the role of type and scale dependence and we argue that a number of existing frameworks studying the macro consequences of micro investment heterogeneity rest on a particular combination of type and scale dependence. Second, we show that their distinction is crucial for assessing the effects of wealth taxation. In an incomplete markets quantitative model calibrated to the US using micro datasets, both channels are found to lead to opposite predictions regarding wealth taxation. Under type-dependence, rich individuals with low capital returns dissave faster than those with high capital returns. By taxing the stock of wealth of the richest households, only the fittest survive at the top which reinforces the selection of agents with high investment skills among the rich. When returns to wealth reflect capital productivity, taxing wealth at a high rate is optimal because it raises productivity. Under scale-dependence, a wealth tax reduces productive investments, such that subsidizing wealth becomes optimal. In a benchmark model calibrated to take into account both channels, it is optimal to tax wealth at 0.8% above an exemption threshold of 550K with little effects on overall productivity. This tax rate remains robust when returns reflect rents instead of productivity. However, in such a case, the optimal wealth tax increases under scale dependence but decreases under type dependence such that both effects on the size of extracted rents almost cancel each other in the benchmark economy. In the second chapter, Sumudu Kankanamge and I study how entrepreneurship contributes to the micro and macro-level patterns of gross labor market flows, and explains why the selection into that occupation is highly responsive to unemployment insurance (UI) changes. Our framework merges search models in the spirit of Mortensen et al. (1994) with an occupational choice models with entrepreneurship along the lines of Quadrini (2000) and Cagetti and De Nardi (2006). We show that our model is able to replicate key facts regarding occupational flows at the aggregate level and along the ability and wealth distributions. Higher UI is associated with strong disincentive to start businesses out of unemployment and employment, consistent with CPS data. Intuitively, higher UI generosity changes the riskiness of self-employment relative to paid-employment. In turn, this has important aggregate implications on occupational masses. Surprisingly, we find that an increase in UI generosity leads to an increases in the unemployment and employment rates, but substantially decreases the self-employment rate. In the third chapter, Sumudu Kankanamge and I study the role of the market for small and medium-sized enterprises (SME) for the transmission of the intangible value of businesses within and across generations of entrepreneurs [...]