Download or read book Essays on the Macroeconomic Effects of Heterogeneous Information written by Viadyanathan Venkateswaran and published by . This book was released on 2011 with total page 336 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays in Heterogeneous Agent Macroeconomics written by Nobuhide Okahata and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In these essays, I study the implications of macroeconomic policies under the environment with rich heterogeneities of economic agents. The analyses in these essays highlight that income and wealth inequality among agents could change the responses of macroeconomic policies and large aggregate shocks from those in the representative agent models. These results could modify our understanding of economic dynamics and the effect of macroeconomic policies. As an illustration, I focus on the monetary policy in a closed economy model and capital controls in an open economy model. I also develop a new nonlinear and global numerical solution method to analyze a class of heterogeneous-agent macroeconomic models. In the first chapter, ''An Alternative Solution Method for Continuous-Time Heterogeneous Agent Models with Aggregate Shocks'', I propose an alternative solution method for continuous-time heterogeneous agent models with aggregate shocks by extending the Backward Induction method developed initially for discrete-time models by Reiter (2010). The existing methods commonly used in the literature essentially rely on the local linearization and are only applicable to the problems where certainty equivalence with respect to aggregate shocks holds. On the other hand, the proposed method is nonlinear and global with respect to both idiosyncratic and aggregate shocks and thus suitable to investigate models where large aggregate shocks exist or nonlinearity matters. I apply this method to solve a Krusell and Smith (1998) economy and evaluate its performance along two dimensions: accuracy and computation speed. I find that the proposed method is accurate even with large aggregate shocks and high curvature without surrendering computation speed (the baseline economy is solved within a few seconds). This new method is also applied to a model with recursive utility and an Overlapping Generations (OLG) model, and it is able to solve both models quickly and accurately. In the second chapter, ''Consumption Inequality and Monetary Policy in a Heterogeneous-Agent New Keynesian Model'', I consider a continuous-time heterogenous-agent New Keynesian model with the wealth effect of the labor supply and study quantitative implications of additional insurance mechanisms available to the households. Our numerical experiment illustrates cross-sectional consumption inequality increases after a contractionary monetary policy shock which is consistent with the previous empirical result while it contradicts with predictions of the model without the wealth effect of the labor supply. Furthermore, consumption response to contractionary monetary policy shock is dampened, and a cross-sectional average of utilities decreases while the opposite is true in the model without wealth effect. These results suggest that propagation of monetary policy shock to the aggregate variables and welfare depends critically on additional insurance instruments available to agents. The third chapter, ''Capital Controls under Income Heterogeneity'', studies the welfare implication of capital controls under the small open economy model with the idiosyncratic income risks and the borrowing constraints. A calibrated model computes the change in welfare for different levels of capital controls. Compared to the recent studies, welfare gain of capital controls becomes small under agent income heterogeneity. For the economy with low borrowing capacity, capital controls become more effective compared to the baseline case.
Download or read book Essays on Informational Frictions in Macroeconomics and Finance written by Jennifer La'O and published by . This book was released on 2010 with total page 220 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of four chapters analyzing the effects of heterogeneous and asymmetric information in macroeconomic and financial settings, with an emphasis on short-run fluctuations. Within these chapters, I study the implications these informational frictions may have for the behavior of firms and financial institutions over the business cycle and during crises episodes. The first chapter examines how collateral constraints on firm-level investment introduce a powerful two-way feedback between the financial market and the real economy. On one hand, real economic activity forms the basis for asset dividends. On the other hand, asset prices affect collateral value, which in turn determines the ability of firms to invest. In this chapter I show how this two-way feedback can generate significant expectations-driven fluctuations in asset prices and macroeconomic outcomes when information is dispersed. In particular, I study the implications of this two-way feedback within a micro-founded business-cycle economy in which agents are imperfectly, and heterogeneously, informed about the underlying economic fundamentals. I then show how tighter collateral constraints mitigate the impact of productivity shocks on equilibrium output and asset prices, but amplify the impact of "noise", by which I mean common errors in expectations. Noise can thus be an important source of asset-price volatility and business-cycle fluctuations when collateral constraints are tight. The second chapter is based on joint work with George-Marios Angeletos. In this chapter we investigate a real-business-cycle economy that features dispersed information about underlying aggregate productivity shocks, taste shocks, and-potentially-shocks to monopoly power. We show how the dispersion of information can (i) contribute to significant inertia in the response of macroeconomic outcomes to such shocks; (ii) induce a negative short-run response of employment to productivity shocks; (iii) imply that productivity shocks explain only a small fraction of high-frequency fluctuations; (iv) contribute to significant noise in the business cycle; (v) formalize a certain type of demand shocks within an RBC economy; and (vi) generate cyclical variation in observed Solow residuals and labor wedges. Importantly, none of these properties requires significant uncertainty about the underlying fundamentals: they rest on the heterogeneity of information and the strength of trade linkages in the economy, not the level of uncertainty. Finally, none of these properties are symptoms of inefficiency: apart from undoing monopoly distortions or providing the agents with more information, no policy intervention can improve upon the equilibrium allocations. The third chapter is also based on joint work with George-Marios Angeletos. This chapter investigates how incomplete information affects the response of prices to nominal shocks. Our baseline model is a variant of the Calvo model in which firms observe the underlying nominal shocks with noise. In this model, the response of prices is pinned down by three parameters: the precision of available information about the nominal shock; the frequency of price adjustment; and the degree of strategic complementarity in pricing decisions. This result synthesizes the broader lessons of the pertinent literature. However, this synthesis provides only a partial view of the role of incomplete information: once one allows for more general information structures than those used in previous work, one cannot quantify the degree of price inertia without additional information about the dynamics of higher-order beliefs, or of the agents' forecasts of inflation. We highlight this with three extensions of our baseline model, all of which break the tight connection between the precision of information and higher-order beliefs featured in previous work. Finally, the fourth chapter studies how predatory trading affects the ability of banks and large trading institutions to raise capital in times of temporary financial distress in an environment in which traders are asymmetrically informed about each others' balance sheets. Predatory trading is a strategy in which a trader can profit by trading against another trader's position, driving an otherwise solvent but distressed trader into insolvency. The predator, however, must be sufficiently informed of the distressed trader's balance sheet in order to exploit this position. I find that when a distressed trader is more informed than other traders about his own balances, searching for extra capital from lenders can become a signal of financial need, thereby opening the door for predatory trading and possible insolvency. Thus, a trader who would otherwise seek to recapitalize is reluctant to search for extra capital in the presence of potential predators. Predatory trading may therefore make it exceedingly difficult for banks and financial institutions to raise credit in times of temporary financial distress.
Download or read book Essays on Macroeconomics with Heterogeneous Regions written by Chang Liu and published by . This book was released on 2020 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Stock Market Volatility and Price Discovery written by Jose Gonzalo Rangel and published by . This book was released on 2006 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on Information and Heterogeneity in Macroeconomics written by and published by . This book was released on 2017 with total page 193 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays in Empirical Macroeconomics written by Julian Felix Ludwig and published by . This book was released on 2019 with total page 274 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines how expectations are formed and how they interact with economic activities. Beliefs about economic outcomes vary with timing and accuracy of information, which have important implications for macroeconomic dynamics. The importance of expectations has long been emphasized in rational expectations (RE) models (see e.g. Lucas 1972, 1976; Kydland and Prescott 1982), and diffusion of information has been modeled in many ways (see e.g. Beaudry and Portier 2004, 2006; Mankiw and Reis 2002; Woodford 2003; Sims 2003). My work builds on this literature and aims to improve the understanding of information structure, formation of beliefs, and decision-making, and how they contribute to macro business cycles. In the first chapter, I point out how identification of full information rational expectations (FIRE) models suffers from Manski's (1993) reflection problem. I extend the standard rational expectations (RE) model to allow for a more general information structure and introduce a new framework to identify the generalized model with forecaster data. Identification is no longer subject to the reflection problem when two changes are made to the information structure: the addition of news shocks and imperfect information. News shocks provide additional variation in expectations about the future. Imperfect information provides changes in beliefs about past states, through which the feedback between expectations and decisions goes only in one direction. Expectations data are consistent with both. An application to Greenbook forecasts illustrates the importance of both news shocks and learning about the past. When I apply this framework to a Blanchard and Quah (1989) decomposition, I reach qualitatively new results. For example, expansionary supply shocks decrease unemployment. Supply shocks are also particularly subject to both news and information rigidities, so relaxing the information structure is key to correctly identifying these shocks. In the second chapter, I discover how both good and bad news shocks coincide with higher uncertainty on impact. This new stylized fact is robust to different empirical models of the news shocks literature and different proxies for U.S. macro uncertainty. The new stylized fact has implications in three fields. First, bad news shocks produce the dynamics discovered in the uncertainty literature: spikes in uncertainty are followed by drops in output. I show that there is indeed some overlap between bad news and uncertainty shocks, as the effect of an uncertainty shock gets weaker when controlling for bad news shocks. Second, I show that the close relationship between news shocks and uncertainty seems to be also responsible for the close relationship between quarterly stock returns and stock market volatility - a proxy for uncertainty. This contributes to the finance literature that works on this relationship. Third, introducing a non-linear empirical model, I find additional asymmetries in the responses to news shocks due to the asymmetric response of uncertainty. This contributes directly to the news shocks literature. An important conclusion of chapters one and two is that economic shocks vary with availability of information. The third chapter deals with such heterogeneity. I relax the assumption that economic shocks of the same type are homogeneous, respectively, always have the same effect. Instead, I argue that economists identify a shock that consists of a variety of heterogeneous components. For example, a technology shock is the sum of all disaggregate technology shocks, from innovations in marketing up to inventions in the manufacturing process, which all have different effects on the economy. I discuss how standard identification methods can identify the shocks of interest despite this heterogeneity. I find that the weights on the shock components depend on the identification strategy so that different identification strategies produce different effects. This could explain why different macro papers often identify different responses to the same shock, in the same country, and over the same time period
Download or read book Three Essays in Macroeconomics with Heterogeneous Agents written by Ying Tung Chan and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "This thesis extends the macroeconomic theory with heterogeneous agents by taking account of heterogeneous households' interaction among themselves, in the form of comparing their consumptions or incomes, and by allowing heterogeneous firms to interact in a strategic fashion. In Chapter 2, I study how behavioral hypotheses such as the concern for status (relative consumption) and inequality aversion can lead to useful predictions about the evolution of wealth distribution and asset accumulation. Households are heterogeneous in terms of initial endowments and idiosyncratic shocks to their labor productivity. I propose a generalized concept of consumption externalities which include as special cases the concern for relative consumption, and preferences that display inequality aversion. In Chapter 3, I focus on interactions among heterogeneous firms in an oligopolistic framework. I assume that that the products offered by these firms are not perfect substitutes. More important, the degree of substitutability may vary across products within the industry. I offer a general formulation of industry structure such that monopoly, oligopoly, and monopolistic competition can be obtained as special cases. In Chapter 4, we study how preferences that display ambiguity aversion play a role in the job search process and affects the equilibrium rates of unemployment and vacancy. Ambiguity refers to the lack of information about probability distributions. The traditional job search model assumes that there are random matches between job seekers and firms (or vacancies), and the random draws have objective probability distributions that are known to both sides of the markets. We modify this model and assume that economic agents are uncertain about the underlying probability distributions. This chapter contributes to our understanding of how ambiguity aversion affects the unemployment rate and aggregate productivity." --
Download or read book Essays on Macroeconomics with Heterogeneous Agents written by Min Fang (Economist) and published by . This book was released on 2021 with total page 147 pages. Available in PDF, EPUB and Kindle. Book excerpt: "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.
Download or read book Essays in Macroeconomics and Dynamic Factor Models written by Ziyi Guo and published by . This book was released on 2013 with total page 126 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on Heterogeneity and Macroeconomic Dynamics written by Giacomo Caracciolo and published by . This book was released on 2019 with total page 133 pages. Available in PDF, EPUB and Kindle. Book excerpt: Limited asset market participation is a well-known stylized fact and a widespread phenomenoneven in developed economies. While existing models have already examinedthe effects of social security and its reforms on welfare and inequality, little attentionhas been devoted to the role of public pensions in the context of limited asset marketparticipation. I develop a quantitative overlapping generations general equilibriummodel where heterogenous agents face a financial friction limiting access to capital markets.I examine how, in presence of the market imperfection, a public pay-as-you-gosystem affects consumption and wealth inequality and compare the results with a standardmodel that does not account for limited asset market participation. In a secondexercise, I study the implications, in terms of inequality, of an increase in the retirementage in response to a population ageing shock. I find that limited asset participation isimportant for the analysis of the impact of social security on overall inequality and oninequality within age groups.
Download or read book Essays on Macroeconomic Policy with Heterogeneous Agents and Digital Assets written by Antzelos Kyriazis and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation has three chapters. In the first chapter, I build a three-agent preferred-habitat New Keynesian (PHANK) model. I show that the fiscal multiplier decreases in the presence of countercyclical QE policies after a fiscal expansion since countercyclical QE implies that the central bank sells government bonds, leading to higher expected returns on these bonds, which in turn incentivizes the bondholders to save more. However, since bondholders save more, they consume less, and as a result, consumption inequality between the savers and the non-savers falls, but wealth inequality increases. The qualitative results are similar in a medium-scale heterogeneous agents New Keynesian (HANK) model. In the three-agent model, I also solve for the optimal fiscal and QE policies at the zero lower bound, and I find that both are expansionary. The optimal increase in central bank asset purchases allows the government to increase government spending by less relative to the case where QE follows a countercyclical rule, so lower tax revenues are needed. In the second chapter, I study how US QE programs affect the US economy and the emerging market economies regarding their macro aggregates and asset prices. First, using Bayesian VAR models, I find that expansionary QE has positive and statistically significant effects in the US economy and the emerging market economies; real GDP, real investment, the price level, and asset prices rise. However, in emerging market economies, the currencies appreciate, the current account-to-GDP ratios deteriorate, the money supply increases, and the government bond yields increase. Then, I build a two-country HANK model that matches the empirical responses. Through the model, I examine how wealth inequality evolves both in the US economy and in the emerging market economy after a positive QE shock. Wealth inequality increases in the short run but decreases over the medium run in both countries. Also, I study the effects of policies that aim to reduce the leverage in the financial sector of the emerging market economy, such as capital controls, and I find that this policy indeed reduces the capital flows and leverage. However, economic activity also falls, and the welfare effects are mixed across households.The last chapter resulted from my strong interest in digital assets that emerged during my last year in the program. In this chapter, which results from collaborative work with Iason Ofeidis, Georgios Palaiokrassas, and Leandros Tassiulas, we examine the effects of unexpected changes in US monetary policy on digital asset returns, and on DeFi-related variables such as borrowing rates, outstanding debt, and TVL. We also examine the effects that the FOMC statement releases and the Minutes releases have on the volatility of digital asset returns. Finally, we examine how DeFi activity evolves around the FOMC announcements. The results from this chapter show first that the returns on digital assets are significantly affected by the unexpected part of the FOMC announcements. The volatility of the returns is also significantly affected by the FOMC releases but less significantly affected by the Minutes releases. Second, the DeFi-related variables are also affected by unexpected changes in monetary policy. Lastly, we find that the most significant spikes in DeFi activity occur on the FOMC announcement days or days very close to the announcement days.
Download or read book Essays on Macroeconomics with Plant Heterogeneity written by Jinhee Woo and published by . This book was released on 2016 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The theme of this thesis is to understand the role of plant heterogeneity in shaping the dynamics of aggregate economy along business cycles. The first chapter investigates the cyclicality of plant entry and exit and its role in shaping the dynamics of aggregate economy along business cycles. The second chapter provides micro founded explanations regarding the dynamics of capital utilization in response to the news shock. The United States establishment exit rate is acyclical. This poses a challenge to canonical models of industry dynamics-e.g., Hopenhayn (1992), which imply a strongly counter-cyclical exit rate. To reconcile this gap between theory and data, imperfect information is introduced. Potential entrants have imperfect information about their productivity, leading to a signal extraction problem. When the volatility of idiosyncratic productivity dominates that of aggregate, as we observe in the micro data, potential entrants overestimate their productivity, and the value of entering, in booms. This amplified entry further increases factor prices and crowds out marginal incumbents, making the exit rate almost acyclical. The imperfect information mechanism proposed here also yields three testable implications: (i) entry is more cyclical in the industries where idiosyncratic components dominate; (ii) plant entry by new firms is more cyclical than that by existing firms; (iii) plants established by new firms during booms are more likely to exit rapidly. We show that all three predictions are consistent with the data. In the second chapter, by estimating a panel VAR on two-digit manufacturing data using the identification scheme proposed by Beadury and Portier (2006), I find positive co-movement between investment and capital utilization (the workweek of capital) in response to a news shock. This is inconsistent with the canonical q-theory model of capital adjustment dynamics where good news about the future raises the marginal value of capital and leads the firm to preserve its capital for later use through less utilization today. With fixed costs in capital adjustment, plants make discrete, or "lumpy", adjustments such that if plants are subject to decreasing returns, q declines as they near the point of investment. Since good news makes large investments more likely, this triggers a fall in q and reduces the opportunity cost of utilization. To simultaneously explain the co-movement of investment and capital utilization with plant level investment behavior, I propose a heterogeneous plant model that combines fixed adjustment costs and an endogenous capital utilization choice. When the model economy is calibrated to match salient features of the plant level investment rate distribution, it generates positive co-movement between investment and capital utilization."--Pages v-vi.
Download or read book Essays in Macroeconomics written by Yuriy Gorodnichenko and published by . This book was released on 2007 with total page 492 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on Incomplete Information Model Uncertainty and Macroeconomic Policy written by Giacomo Rondina and published by . This book was released on 2007 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Long Term Macroeconomic Effects of Climate Change A Cross Country Analysis written by Matthew E. Kahn and published by International Monetary Fund. This book was released on 2019-10-11 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the long-term impact of climate change on economic activity across countries, using a stochastic growth model where labor productivity is affected by country-specific climate variables—defined as deviations of temperature and precipitation from their historical norms. Using a panel data set of 174 countries over the years 1960 to 2014, we find that per-capita real output growth is adversely affected by persistent changes in the temperature above or below its historical norm, but we do not obtain any statistically significant effects for changes in precipitation. Our counterfactual analysis suggests that a persistent increase in average global temperature by 0.04°C per year, in the absence of mitigation policies, reduces world real GDP per capita by more than 7 percent by 2100. On the other hand, abiding by the Paris Agreement, thereby limiting the temperature increase to 0.01°C per annum, reduces the loss substantially to about 1 percent. These effects vary significantly across countries depending on the pace of temperature increases and variability of climate conditions. We also provide supplementary evidence using data on a sample of 48 U.S. states between 1963 and 2016, and show that climate change has a long-lasting adverse impact on real output in various states and economic sectors, and on labor productivity and employment.
Download or read book Essays in Honor of Cheng Hsiao written by Dek Terrell and published by Emerald Group Publishing. This book was released on 2020-04-15 with total page 472 pages. Available in PDF, EPUB and Kindle. Book excerpt: Including contributions spanning a variety of theoretical and applied topics in econometrics, this volume of Advances in Econometrics is published in honour of Cheng Hsiao.
