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Author: George Themistocles Kanaginis
Publisher:
ISBN:
Category :
Languages : en
Pages : 202
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Author: George Themistocles Kanaginis
Publisher:
ISBN:
Category :
Languages : en
Pages : 202
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Author: Cheng Zhou
Publisher:
ISBN:
Category :
Languages : en
Pages :
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This dissertation analyzes the effects of monetary policy and fiscal policy from a state-dependent perspective. The first chapter is on the dynamic effect of monetary policy on asset price. Employing a two-state threshold local projection method, we find that when the Fed increases the Federal Funds rate, the stock price decreases in normal times, but increases during bubbly episodes. We allow time-varying risk premium and show that this result is driven by both the asymmetric effects on fundamentals and the existence of bubbles. Moreover, the paper captures the effect of an exogenous tightening monetary shock on stock prices as an increasing function of the size of bubbles, using a flexible semiparametric varying-coefficient model specification. The state-dependent evidence is more informative in measuring monetary policy effects than linear or time-varying methods, and is also robust to different identification schemes and various definitions of bubbles. This paper points out two important transmission channels of monetary policy on asset price: risk premium and asset bubbles, which are often ignored in theoretical models. On the policy side, our empirical analysis suggests that central banks should be cautious about adopting "leaning against bubble" monetary policies when the bubble size is relatively large. Another contribution is that we propose a novel empirical framework to study generalized state-dependent impulse response functions, a methodology which should have many applications in macroeconomics. The second chapter uses more than one hundred years of US historical data to examine the fiscal multiplier and how it may differ during different economic conditions. Using the flexible semiparametric varying coefficient method in the framework of local projections, we directly model the fiscal multiplier as a function of various state variables. The paper shows that the U.S. fiscal multiplier is slightly below one and approximately the same, during periods of slack as compared to normal times. Our results suggest that fiscal policy was not necessarily a more powerful tool to stimulate aggregate demand during the "Great Recession". The electronic version of this dissertation is accessible from http://hdl.handle.net/1969.1/155721
Author: Choongryul Yang
Publisher:
ISBN:
Category :
Languages : en
Pages : 392
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My dissertation investigates the transmission of monetary and fiscal policy using both empirical and theoretical frameworks. Chapter 1 examines how the number of products sold by a firm affect its decisions regarding price setting and information acquisition. Using a firm-level survey from New Zealand, I show that firms that produce more goods have both better information about aggregate inflation and more frequent but smaller price changes. To characterize the implications of these empirical findings for the ability of monetary policy to stimulate the economy, I develop a new dynamic general equilibrium model with rationally inattentive multi-product firms that pay a menu cost to reset their prices. I show that the interaction of the menu cost and rational inattention frictions leads firms to adopt a wait-and-see policy and gives rise to a new selection effect: firms have time-varying inaction bands widened by their subjective uncertainty about the economy such that price adjusters choose to be better informed than non-adjusters. This selection effect endogenously generates a distribution of desired price changes with a majority near zero and some very far from zero, which acts as a strong force to amplify monetary non-neutrality. I calibrate the model to be consistent with the micro-evidence on both prices and inattention and find two main quantitative results. First, the new selection effect, coupled with imperfect information of price setters, leads to real effects of monetary policy shocks in the one-good version of the model that are nearly as large as those in the Calvo model. Second, in the two-good version of the model, as firms optimally choose to have better information about monetary shocks, the real effects of monetary policy shocks decline by 20%. In Chapter 2, joint with Hassan Afrouzi, we develop a general equilibrium flexible price model with dynamic rational inattention in which the slope of the Phillips curve is endogenous to systematic aspects of monetary policy. This Phillips curve is flatter when the monetary policy is more hawkish: rationally inattentive firms find it optimal to ignore monetary policy shocks when the monetary authority commits to stabilize nominal variables. Moreover, an unexpectedly more dovish monetary policy leads to a completely flat Phillips curve in the short-run and a steeper Phillips curve in the long-run. We also develop a tractable method for solving general dynamic rational inattention models in linear quadratic Gaussian setups. Chapter 3 asks whether the effectiveness of fiscal stimulus policy depends on the degree of economic income inequality. Many previous works about state-dependence of fiscal multiplier have focused on the degree of slack in the economy. In a surge of concerns about rising inequality of the U.S., I use rich historical state-level data on military procurement and inequality to find the relationship between the degree of income inequality and the local government spending multipliers. I show that the effects of government spending shocks on output are larger in low-inequality states than in high-inequality states. In contrast, I find no evidence that employment multipliers differ by the extent of income inequality. These results are robust to various specifications and other sources of inequality data. I also estimate aggregate output multipliers using historical military spending and income inequality data. I find the evidence that aggregate output multipliers are high when the income inequality is low. Thus, both local and aggregate multipliers are significantly affected by the degree of income inequality of an economy. I consider a variety of potential theoretical explanations for the results, including heterogeneous within-sector inequality and distributional effects of government spending shock, but find that none can adequately explain this finding
Author: Richard Abel Musgrave
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 392
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Author: Thitima Chucherd
Publisher:
ISBN:
Category : Fiscal policy
Languages : en
Pages : 474
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This thesis addresses interactions between monetary and fiscal policies in a theoretical dynamic stochastic general equilibrium (DSGE) model of a small open economy and in an empirical model under a structural vector error correction model (SVECM). The thesis consists of three essays. The contribution is both theoretical and empirical that enables a better understanding of the complexity of interactions between monetary and fiscal policies in small open economies. The first essay examines the equilibrium determinacy under monetary and fiscal rules. The goal is to investigate how monetary and fiscal policy interactions ensure a unique and non-explosive (determinate) equilibrium for a small open economy. The study focuses when policy makers implement a set of policy mixes to address domestic output price inflation control for monetary policy, debt stabilization for fiscal policy, and joint output stabilization tasks. The result indicates that two policy schemes facilitate a determinate equilibrium. First, monetary policy actively controls inflation when fiscal policy sets a sufficient feedback on debt. Second, monetary policy becomes passive against inflation when fiscal policy is insolvent. Adding output stabilization to each rule simply causes variants of this fundamental. An interest rate rule with output stabilization can be more passive against inflation while providing a stronger response to the output gap. Fiscal policy is required to set higher feedback on debt along with its stronger counter-cyclical policy. The second essay links between the equilibrium determinacy and policy optimization. This essay provides insights into the design of policy mixes and compares determinacy outcomes between two theoretical models of a small open economy: with and without an explicit exchange rate role. This study shows that policy interactions in a small open economy with an endogenous exchange rate is quite sophisticated, especially when a monetary rule is added with an output stabilization task and/or targeted to Consumer Price Index (CPI) inflation. Additional concern for monetary policy in an open economy causes a partial offset to its reaction on domestic output price inflation that weakens its effect on the real debt burden. To minimize economic fluctuations, policy makers should mute the role of output stabilization for monetary policy, and set minimum feedback on debt that is compatible with the degree of counter-cyclical fiscal policy. Substantially active response to inflation is satisfactory for monetary policy with CPI inflation targeting. The third essay empirically presents monetary and fiscal policy interactions in Thailand's SVECM suggested by a theoretical DSGE model developed from the previous essays. This essay shows that the DSGE-SVECM model can be supported by Thai data. A shock to monetary policy is effective with a lag. Government spending policy is also effective with a lag and some crowding-out effects on output. An adverse shock in tax policy unexpectedly stimulates the economy, indicating room for enhancing economic growth by relaxing revenue constraint. Monetary policy is mainly implemented to correct a consequence of a fiscal shock on inflation (and also the domestic and foreign shocks), while fiscal policy appears to counter a consequence of the monetary policy shock on output.
Author: Arturo Antón
Publisher:
ISBN:
Category :
Languages : en
Pages : 224
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Author: Tannous Kass-Hanna
Publisher:
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Category :
Languages : en
Pages : 0
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This thesis tackles the transmission of fiscal policy, with a focus on noisy news and its cross-border spillovers. It is composed of four chapters: In the first chapter, I provide an analytical characterization of the effects of noisy news shocks on the transmission of fiscal policy. Using a small-scale Dynamic Stochastic General Equilibrium (DSGE) model with capital accumulation and endogenous labor supply, this chapter shows how aggregate noise dampens the propagation of anticipated fiscal policy over the business cycle, thus reducing the fiscal multiplier. In the second chapter, I investigate the cross-border spillovers of fiscal stimuli policies - as conducted in the aftermath of the Great Recession - using a two-country New Keynesian DSGE model. Fiscal policy is assumed to be noisy: private agents receive an idiosyncratic noisy signal about future government spending shocks. This characterization of the model allows for the dispersion of individuals' expectations and captures one of the components of fiscal policy uncertainty. This chapter also shows a method for identifying the relevance of noise within fiscal policy news, and computes the average level of noise using the Survey of Professional Forecasters (SPF) dataset. By comparing the model simulations under the case of full information with that under noisy fiscal policy, this chapter illustrates how noise considerably weakens the international spillovers of fiscal policy. The third chapter tackles the domestic and cross-border quantitative effects of fiscal policy within a monetary union by building a two-country Heterogeneous Agents New-Keynesian (HANK) model in order to quantify the internal and external spillovers of fiscal policy on growth and inequality. Using the Household Finance and Consumption Survey (HFCS) data for Germany and the rest of Euro area, the model is calibrated to match wealth and income distributions. As a policy experiment, I take the case of the fiscal devaluation, that attempts to mimic competitive exchange rate devaluation. The results suggest that specific country policy has non-negligible impact on other country wealth distribution. Inequality transmits through two channels: (i) prices, which affect the household consumption level and split between foreign and home goods and, (ii) the interest rate on bonds, whose any change affects all the members in the monetary union. Finally, this chapter sheds the light on the importance of introducing heterogeneity at the international level in understanding the complex transmission of fiscal policy. In the final chapter, I augment a dynamic labor market general equilibrium model with search and matching frictions in the public and private sectors to include components of government spending: public wage bills, public investment, and transfers. The model elucidates the interactions between public and private sectors, and have numerous policy implications. I also conduct model simulations that show how a policy mix decreasing public employment and increasing public investment can boost the private sector and increase fiscal space in the long run.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 102
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Author: Reinhard Neck
Publisher: Springer Science & Business Media
ISBN: 3540746846
Category : Political Science
Languages : en
Pages : 386
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Econometric techniques and models are still being extensively used in the business of forecasting and policy advice. This book presents recent advances in the theory and applications of quantitative economic policy, with particular emphasis on fiscal and monetary policies in a European and global context. The volume honors Andrew Hughes Hallett, a pioneer and major scientist in quantitative economic policy analysis, whose contributors are among his friends and former students.
Author: Alan Arthur Walters
Publisher: Edward Elgar Publishing
ISBN: 9781781957615
Category : Business & Economics
Languages : en
Pages : 386
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As a tribute to the exceptional contributions of Alan Walters to monetary theory and policy, this book draws together a distinguished cast of international contributors to write about money. In a series of essays they review controversies in monetary economics and debate current policy issues. Combining theoretical analysis with policy evaluation, this book touches on a whole spectrum of issues ranging from monetary union and exchange rate regimes, to credit rationing and policy games. The book focuses on the problems of modeling the effects of monetary and fiscal policy, and setting optimal policies for the future. It concludes with two stimulating panel discussions, one questioning whether the UK should join the Euro and the other discussing the appropriate targets of monetary policy.
