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Author: Claire Thürwächter
Publisher:
ISBN: 9789180142670
Category :
Languages : en
Pages : 0
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Author: Claire Thürwächter
Publisher:
ISBN: 9789180142670
Category :
Languages : en
Pages : 0
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Book Description
Author: Roberto Naim Jorge Fattal Jaef
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 252
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Author: Christian D. Bustamante Amaya
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 119
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In these essays, I study the interplay of monetary policy with agent heterogeneity in economies with frictional markets. While accounting for the heterogeneity observed at the micro level, I investigate the implications of having persistent differences in firms and households' balance sheets and their consequences for business cycle fluctuations in monetary economies during both normal times and in times of economic distress. In the first chapter, “Debt Overhang, Monetary Policy, and Economic Recoveries After Large Recessions”, I explore why conventional monetary policy was so ineffective in mitigating the severity of the 2007 U.S. recession and unsuccessful thereafter in stimulating aggregate demand. Linking firm-level data with predictions from a model, I show that accounting for individual firms’ debt structures is crucial in explaining why business investment fell so dramatically through the recession and remained low for several years, despite the Federal Reserve repeatedly cutting its target interest rate until conventional policy tools were exhausted. Using a sample of publicly traded firms, I establish that firms with greater long-term debt exposure experienced larger contractions and slower recoveries in their investment expenditure. Next, I show that debt overhang episodes were unusually prevalent over the years following the onset of the recession, and particularly so among firms relying more heavily on long-maturing debt. To understand these microeconomic observations and their implications for aggregates, I develop a New Keynesian model where heterogeneous firms finance investment using defaultable nominal long-term debt and where the central bank faces an explicit zero lower bound constraint. There, the greater a firm’s leverage, the higher its likelihood of experiencing a debt overhang episode following a large aggregate shock. Moreover, the severity of debt overhang problems, and their consequences for the distribution and level of aggregate investment, compounds with (1) an increased real value of debt, i.e., debt deflation, and (2) the monetary authority’s inability to restore inflation once nominal interest rates reach the zero lower bound. Together, firms’ long maturity debt positions and the binding zero lower bound are critical in transmitting the consequences of a deep recession into a remarkably anemic recovery in aggregate investment.
Author: Alaïs Martin-Baillon
Publisher:
ISBN:
Category :
Languages : en
Pages : 256
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Book Description
It is now recognized that the heterogeneity of economic agents plays a crucial role in understanding the fluctuations of an economy. The different chapters of my thesis serve the same question: How does heterogeneity changes the way economic policies should be conducted? Today, heterogeneous-agent macroeconomics is developing in several directions, each shedding different light on the problems we face as economists. My thesis is at the confluence of the different facets of this field. The first chapter of my thesis, participates in the heterogeneous agent macroeconomics that derives analytical solutions in reduced-heterogeneity models. I study how governments should increase or decrease taxes on firms over the business cycle. I show that taking into account firms heterogeneity greatly changes tax policy recommendations. The second chapter of my thesis is part of quantitative heterogeneous agent macroeconomics. We study whether monetary policy should use its ability to redistribute wealth among heterogenous households to achieve its objectives. The third chapter of my thesis participates in field that uses micro data to understand macroeconomics and to design public policies. I estimate firms' propensities to invest to better understand how economic policies can vary firms' investment by varying their income.
Author: Timothy Moreland
Publisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages : 209
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Book Description
Chapter 1: Financial Consolidation and the Cyclicality of Corporate FinancingWe study the impact of the concentration and complexity of the banking sector on firms' financing and investment behavior over the business cycle. We find that, after the late 1990s, while debt issuance remained procyclical for U.S. firms of all sizes, equity issuance and liquidity accumulation switched from countercyclical to procyclical for small and medium- sized publicly-traded firms. Using matched firm-bank data, we provide evidence that bank consolidation contributed to this change. We rationalize these findings in a general equilibrium business cycle model. After bank consolidation, the weakening in firms' bargaining power and relational ties with banks enhances firms' precautionary demand for liquidity and equity issuance incentives following positive shocks. The change in financing behavior increases investment and employment sensitivity to aggregate productivity shocks.Chapter 2: Monetary Policy and Firm Heterogeneity: The Role of Leverage Since the Financial CrisisWe study how leverage determines firm-level responses to monetary policy. Using both high-frequency financial market and quarterly investment data, we find that the role of leverage in monetary transmission changed around the financial crisis of 2007-09. Firms with high leverage were less responsive to monetary policy shocks in the pre-crisis period but have become more responsive since the crisis. The higher responsiveness is drivenby firms whose leverage is more dependent on long-term debt, suggesting an outsize role for monetary policy affecting long-term funding conditions since the crisis. We also find suggestive evidence for transmission through changes in monetary policy uncertainty.Chapter 3: The International Spillover Effects of US Monetary Policy UncertaintyAn extensive literature studies the international transmission of US monetary policy surprises (shifts in expected path of the policy rate). In this paper we show that changes in uncertainty around the expected path constitute an important additional dimension of spillover effects to global bond yields. In advanced countries, it is the term premium component of yields that responds to uncertainty. We find that this can be explained by an international portfolio balance mechanism. In contrast, for emerging countries it is the expected component of yields that reacts to uncertainty. This can be rationalized from a flight to safety channel. We find heterogeneity in the country-level response to uncertainty only in emerging countries and it is driven by the degree of financial openness. Finally, equity markets in both advanced and emerging countries also respond to US monetary policy uncertainty.
Author: Fabian Schnell
Publisher: Springer
ISBN: 3658097310
Category : Business & Economics
Languages : en
Pages : 180
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Book Description
Fabian Schnell develops a model indicating that by keeping real interest rates too low, monetary policy can distort the allocation of resources across firms and potentially delay economic recovery after a recession. This is a new channel of monetary policy that is especially relevant in view of “Quantitative Easing” programs. A second model focuses on the short-term implications of heterogeneously productive firms, showing an acceleration effect of technology shocks. Finally, an empirical investigation of firms’ price-setting behaviors shows that time-dependent factors, relative to state-dependent ones, play a small role with respect to the probability and the size of a price change. All results provide new insights for monetary policy.
Author: Liyan Shi
Publisher:
ISBN:
Category :
Languages : en
Pages : 136
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Book Description
This dissertation contributes towards the understanding of the macroeconomic effects of micro-level firm dynamics, in particular firm entry, exit, and innovation activities in driving aggregate economic dynamism and growth. It focuses on the frictions affecting firms in these activities when contracting with their managers and workers, as well as peers, and the corrective role policies can play. The dissertation consists of two chapters. The first chapter, "Restrictions on Executive Mobility and Reallocation: The Aggregate Effect of Non-Competition Contracts", assesses the aggregate effect of non-competition employment contracts, agreements that exclude employees from joining competing firms for a duration of time, in the managerial labor market. These contracts encourage firm investment but restrict manager mobility. To explore this tradeoff, I develop a dynamic contracting model in which firms use non-competition to enforce buyout payment when their managers are poached, ultimately extracting rent from outside firms. Such rent extraction encourages initial employing firms to undertake more investment, as they partially capture the external payoff, but distorts manager allocation. I show that the privately-optimal contract over-extracts rent by setting an excessively long non-competition duration. Therefore, restrictions on non-competition can improve efficiency. To quantitatively evaluate the theory, I assemble a new dataset on non-competition contracts for executives in U.S. public firms. Using the contract data, I find that executives under non-competition are associated with a lower separation rate and higher firm investment. I also provide new empirical evidence consistent with non-competition reducing wage-backloading in the model. The calibrated model suggests that the optimal restriction on non-competition duration is close to banning non-competition. The second chapter, "Knowledge Creation and Diffusion with Limited Appropriation" (joint with Hugo Hopenhayn), studies the interaction of innovation and imitation in driving economic growth. In relation to a series of recent papers in the macro literature have emphasized the interaction between the two forces, we introduce two key elements in considering the incentives to innovate versus imitate. First, we consider frictions in matching innovators and imitators in the process of knowledge diffusion. Second, while most of the recent literature assume that imitators capture the entire surplus from knowledge diffusion, we consider a general bargaining problem between the innovators and imitators in dividing surplus. In a simple one period model, we derive a Hosios condition for the optimal surplus division when firms are ex-ante homogeneous. But we also find that as the degree of firm heterogeneity increases, innovators' share of surplus must decrease to maximize growth, approaching zero for sufficiently large heterogeneity. Our calibrated dynamic model suggests that the optimal share of surplus innovators appropriate should be at the lower end, consistent with weak intellectual property rights.
Author: Chang Liu
Publisher:
ISBN:
Category :
Languages : en
Pages : 146
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This dissertation studies macroeconomics with regional heterogeneity in three general dimensions. First, it documents some novel empirical patterns of regional heterogeneity (in Chapter 1, 2, 3). Second, these empirical facts are used to identify key economic forces underlying theoretical models (in Chapter 1 and 3). Third, aggregate implications of regional heterogeneity are also studied (in Chapter 1). In the first chapter of this dissertation, I highlight time-varying regional risk and federal fiscal transfer policy as two competing forces driving regional risk sharing over the business cycle and in turn quantify their impacts on aggregate fluctuations. I find that during an economic downturn, increased regional risk worsens risk sharing and amplifies the impact of aggregate productivity shocks. However, state-contingent federal government transfers provide additional risk sharing and help stabilize the aggregate economy, by providing insurance to the regions that need it the most. In the second chapter (joint with Noah Williams), we first estimate a quarterly dataset for state-level aggregates by building a novel empirical framework that allows for mixed-frequency raw data with measurement errors. We then apply this dataset to study the monetary policy effects at the state levels. We find that states behave remarkably homogeneous with each other in their responses of output and price to an unanticipated monetary policy shock. In the third chapter (joint with Noah Williams), we use the state-level quarterly dataset to analyze the impact of unexpected changes in federal personal and corporate income taxes. We find substantial heterogeneity in the impact of federal fiscal policy across states, with more than half having no significant response to the tax cuts. In addition, less capital-intensive states have larger responses to corporate tax cuts. Although puzzling in standard models, a model with corporate and non-corporate sectors is consistent with this evidence. Overall, our results suggest the importance of variation and reallocation across states in evaluating federal policy.
Author: Gergő Motyovszki
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 156
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This thesis is composed of three independent chapters, but all centered around the broader topic of how macroeconomic policies interact with various aspects of household heterogeneity. Monetary Policy and Inequality under Labor Market Frictions and Capital-Skill Complementarity We provide a new channel through which monetary policy has distributional consequences at business cycle frequencies. We show that an unexpected monetary easing increases labor income inequality between high and less-skilled workers. In particular, this effect is prominent in sectors intensive in less-skilled labor, that exhibit high degree of capital-skill complementarity (CSC) and are subject to matching inefficiencies. To rationalize these findings we build a New Keynesian DSGE model with asymmetric search and matching (SAM) frictions across the two types of workers and CSC in the production function. We show that CSC on its own introduces a dynamic demand amplification mechanism: the increase in high-skilled employment after a monetary expansion makes complementary capital more productive, encouraging a further rise in investment demand and creating a multiplier effect. SAM asymmetries magnify this channel. Monetary-Fiscal Interactions and Redistribution in Small Open Economies Ballooning public debts in the wake of the covid-19 pandemic can present monetary-fiscal policies with a dilemma if and when neutral real interest rates rise, which might arrive sooner in emerging markets: policymakers can stabilize debts either by relying on fiscal adjustments (AM-PF) or by tolerating higher inflation (PM-AF). The choice between these policy mixes affects the efficacy of the fiscal expansion already today and can interact with the distributive properties of the stimulus across heterogeneous households. To study this, I build a two agent New Keynesian (TANK) small open economy model with monetary-fiscal interactions. Targeting fiscal transfers more towards high-MPC agents increases the output multiplier of a fiscal stimulus, while raising the degree of deficitfinancing for these transfers also helps. However, precise targeting is much more important under the AM-PF regime than the question of financing, while the opposite is the case with a PM-AF policy mix: then deficit-spending is crucial for the size of the multiplier, and targeting matters less. Under the PM-AF regime fiscal stimulus entails a real exchange rate depreciation which might offset "import leakage" by stimulating net exports, if the share of hand-to-mouth households is low and trade is price elastic enough. Therefore, a PM-AF policy mix might break the Mundell-Fleming prediction that open economies have smaller fiscal multipliers relative to closed economies. Weak Wage Recovery and Precautionary Motives after a Credit Crunch During the economic recovery following the financial crisis many advanced economies saw subdued wage dynamics, in spite of falling unemployment and an increasingly tight labour market. We propose a mechanism which can account for this puzzle and work against usual aggregate demand channels. In a heterogeneous agent model with incomplete markets we endogenize uninsurable idiosyncratic risk through search-and-matching (SAM) frictions in the labour market. In this setting, apart from the usual precautionary saving behaviour, households can self-insure also by settling for lower wages in order to secure a job and thereby avoid becoming borrowing constrained. This channel is especially pronounced for asset-poor agents, already close to the constraint. We introduce a credit crunch into this framework modelled as a gradual tightening of the borrowing constraint (and utilizing a continuous time approach, known as HACT). The perfect foresight transition dynamics feature falling wages despite a tightening labour market and expanding employment. As households suddenly find themselves closer to the borrowing constraint, the increased precautionary motive drives them to accept lower wages in the bargaining process, while firms respond to this by posting more vacancies, leading to a tighter labour market and falling unemployment. If the household deleveraging pressure is persistent enough after the credit crunch, it can explain the weak wage recovery in spite of already stronger aggregate demand.
Author: Min Fang (Economist)
Publisher:
ISBN:
Category : Housing
Languages : en
Pages : 147
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"This dissertation consists of essays addressing the macroeconomic outcomes of heterogeneous agent general equilibrium models with micro-level frictions. Each chapter employs both empirical and quantitative macroeconomic methods. The first chapter studies the impact of elevated volatility on the effectiveness of monetary policy on aggregate investment under firm-level capital adjustment costs. I argue that monetary policy is less effective at stimulating investment during periods of elevated volatility in firm-level TFP than during normal times. Empirically, I document that high volatility weakens investment responses to monetary stimulus. I then develop a heterogeneous firm New Keynesian model with lumpy investment to interpret these findings. In the model, non-convex capital adjustment costs create a sizable extensive margin of investment which is more sensitive to changes in both interest rate and volatility than the intensive margin. When volatility is high, firms tend to stay inactive at the extensive margin, so monetary stimulus motivates less investment at the extensive margin. I find that the quantitative implications of the model are primarily shaped by the specifications of the capital adjustment costs. Unlike much of the prior literature, I use the dynamic moments of investment to identify this key model element. Based on this parameterization, high volatility reduces the effectiveness of monetary stimulus for investment by 30%. This reduction is about half of what I find in the data. Therefore, the effect of monetary policy depends on both the lumpy nature of firm-level investment and fluctuations in volatility. The second chapter studies the role of migration and housing constraints in determining income inequality within and across Chinese cities. Combining microdata and a spatial equilibrium model, we quantify the impact of the massive spatial reallocation of workers and the rapid growth of housing costs on the national income distribution. We first show several stylized facts detailing the strong positive correlation between migration inflows, housing costs, and imputed income inequality among Chinese cities. We then build a spatial equilibrium model featuring workers with heterogeneous skills, housing constraints, and heterogeneous returns from housing ownership to explain these facts. Our quantitative results indicate that the reductions in migration costs and the disproportionate growth in productivity across cities and skills result in the observed massive migration flows. Combining with the tight land supply policy in big cities, the expansion of the housing demand causes the rapid growth of housing costs, and enlarges the inequality between local housing owners and migrants. The counterfactual analysis shows that if we redistribute land supply increment by migrant flow and increase land supply toward cities with more migrants, we could lower the within-city income inequality by 14% and the national income inequality by 18%. Meanwhile, we can simultaneously encourage more migration into higher productivity cities"--Pages vii-viii.
