This dissertation is divided into three chapters, all originating from original fieldwork. Chapter One explores the impacts of blindness on blind subjects, their caretakers and their households in Amhara Region, Ethiopia, and demand for cataract surgery among those eligible for surgery. Chapter Two explores the impacts of cataract surgery taken up by the eligible: on the subjects themselves as well as their caretakers and households. Chapter Three explores demand for and impacts of cataract surgery among visually impaired members of the Mbola Millennium Village, located outside of Tabora, Tanzania. Variables of interest include, for the blind subjects and their caretakers, activities of daily living and time spent in productive activities, social participation, physical and mental health, and, for the blind subjects, vision-related quality of life and food insecurity. At the household level, we explore transfers and assistance, asset index, consumption, and food insecurity. In Chapter One, we find the blind subjects, their caretakers and households are indeed worse off along many of the above dimensions when compared with matched, non-blind subjects and their households. Among those eligible for cataract surgery in the Ethiopia sample, 76% report for surgery, and we find that gender, age and physical condition are key determinants. In Chapter Two, we find that those who do report for and receive surgery improve along a number of the dimensions listed above, though rarely to a point equal to their non-blind counterparts. Further, evidence of economic impacts at the household level is mixed. Chapter Three reinforces many of the findings from Chapters One and Two, including gender dimensions to uptake, improved quality of life for visually impaired individuals, and mixed results on economic impacts for subjects and their households.

This dissertation studies marginalized populations in the United States and Western countries, with a broad focus on how legal and social institutions affect individual economic outcomes and wellbeing. The first chapter examines the impacts of incarceration on criminal defendants in Houston, Texas, documenting patterns of worsening criminality, diminished earnings and social detachment after exposure to the prison system. The second chapter develops a framework to consider the interplay between discrimination and concealment of minority status in the context of sexual orientation and shows empirical evidence from the United States on the large magnitudes of concealment costs. The third chapter considers the role of legal recognition of unions in shaping the labor market activity and childbearing decisions of same-sex couples in Sweden, implicitly providing insight into some of the constraints imposed on same-sex couples by widespread exclusion from the institution of marriage throughout the world. Together these essays highlight how public institutions and social systems influence lifecycle outcomes in the population, particularly among minority and other vulnerable groups.

This dissertation is a collection of three essays on the design of safety net programs for low-income households in the U.S. Many U.S. safety net programs involve in-kind transfers, which are used in order to both alter consumption patterns among recipients and limit take-up by ineligibles. However, in the absence of its own network of providers, the government must rely on private vendors to serve as its agents in rendering transfers, giving rise to two types of agency problems: (1) vendors may refuse to participate in government programs, leaving needy people unserved or (2) vendors may engage in fraud in order to increase their payoff from participation. A separate issue arises when government intervention in private markets causes general equilibrium effects on third parties. The first essay examines attempts to reduce vendor fraud in the Supplemental Nutrition Program for Women, Infants, and Children (WIC) using data on the staggered rollout of a fraud reduction program in Texas. Vendors were required to move to an electronic payment system, which allowed regulators to more easily verify reimbursement claims. I show that the program was effective in reducing fraud, but also that it increased vendor non-participation, leading to a reduction in WIC take-up among eligible women. I also show that the fraud reduction program increased prices paid by non-WIC shoppers by 9\%. My results indicate that the effectiveness of policies intended to alter consumption patterns among welfare recipients depend crucially on the incentives of providers and that enforcement measures interact with these incentives. The second essay, co-authored with Ilyana Kuziemko and Maya Rossin-Slater, analyzes the effects of contracting out Medicaid benefits to insurance companies on health disparities among low-income mothers and children. Increasingly in U.S. public insurance programs, the state finances competing, capitated health plans rather than using a fee-for-service (FFS) model. We study how high- and low-cost infants (blacks and Hispanics, respectively) are affected by the transition from FFS to Medicaid managed care (MMC). We find that black-Hispanic infant health disparities \emph{widen}---e.g., black mortality increases by 12\% while the Hispanic mortality \emph{decreases} by 22\%---and care worsens for blacks. Additionally, black birth rates fall. We present a model of risk-selection in which capitation incentivizes competing plans to offer better care to low-cost clients to retain them in future periods. The third essay uses a novel identification design to study the impact of the Earned Income Tax Credit (EITC) on fertility among low-income mothers. Maternal labor market time is thought to play an important role in childbearing. Therefore, wage subsidies like the Earned Income Tax Credit (EITC) may impact fertility among low-income households. Existing literature finds no effect of the EITC on completed fertility, however. I therefore consider whether the EITC affects a different fertility outcome: birth spacing. If there are economies of scale in childrearing, mothers may reduce space between births to minimize time spent out of the labor market. Close spacing is thought to be detrimental to child health and educational outcomes. To identify the effects of the EITC, I use a new regression discontinuity design (RD) in first child's birth month around the end of the year. Children born before the end of the year can be claimed as dependents on that year's tax returns, substantially increasing EITC eligibility for first time parents. My design incorporates recent evidence that first time EITC eligibility functions as an information shock for many recipients. I find that EITC receipt decreases time to second child by 3-4\%. Effects are concentrated among single mothers (19\% decrease), whereas I find no effects for married mothers or on completed fertility. My findings suggest there may be unintended negative effects of welfare-to-work policies on children in single parent households. Taken together, my findings demonstrate that the design of welfare programs --- including whether or not delivery of benefits is contracted out to private firms --- plays a crucial role in program efficacy, affecting both equity and efficiency concerns. My findings regarding the role of private vendors contrast with traditional economic research on safety net programs, which tends to focus on agency issues between the government and the low income recipients.

This dissertation contains three essays examining the role of informational frictions in financial markets and its aggregate implications. In the first chapter, I study whether securitization can spur financial fragility. I build a model of banking with securitization, where financial intermediaries hold a well-diversified portfolio of asset-backed securities on their balance sheets. On the one hand, securitization diversifies idiosyncratic risk so as to increase the pledgeability of assets in the economy, allowing more profitable investment projects to be financed. On the other hand, individual financial intermediaries do not internalize the benefit of the transparency of the securities they produce, because that benefit is also diversified. Moreover, when financial intermediaries perceive their environment to be safe, they have little incentive to produce more information about the quality of their assets. This leads to an increase in the opaqueness of securitized assets in the economy, causing greater exposure of financial intermediaries to funding and solvency risk. Policy can have a role because of a market failure that induces the securitized-banking system to produce securities that are too opaque making the economy more prone to crises. An efficient macroprudential policy is to impose a flexible capital surcharge on opaque securities. The second chapter characterizes the optimal interventions to stabilize financial markets in which there is a lemons problem due to asymmetric information. Potential buyers can obtain information about the quality of assets traded in the market to decide whether to buy the assets. A market equilibrium is not necessarily driven by fundamentals, but it can also be driven by agents' beliefs about fundamentals and the corresponding information choices. Multiple self-fulfilling equilibria may arise if the asset price has a large impact on the quality of assets, because a higher asset price increases the likelihood that nonlemons are traded. Large-scale asset purchases are inefficient to correct a market failure, because such purchases crowd out efficient liquidity reallocation in the private sector. In contrast, partial loss insurance, when combined with the credible announcement of an asset price target, implements the efficient allocation as a unique equilibrium. Moreover, the model predicts that direct asset purchases can cause large welfare losses, especially in the mortgage-backed securities markets, and therefore, the partial loss insurance with the credible announcement is the optimal way to correct the market failure in such securities markets. The final chapter examines a new propagation mechanism by which the effects of uncertainty shocks amplify in the context of the dynamic stochastic general equilibrium framework. An increase in the cross-sectional dispersion of idiosyncratic returns induces entrepreneurs, who have risk-shifting incentive, to distort the quality of an investment project. This leads lenders to reallocate credit from the high productivity sector, in which the risk-shifting problem is more prevalent, to the low productivity sector, which in turn depresses aggregate economic activities further. Empirical evidence from NBER-CES Manufacturing Industry Database provides support for the model's predictions.

Healthcare is a large and important part of the United States economy. In 2013, the healthcare sector accounted for 17.4% of GDP and employed 13% of the US workforce. Healthcare expenditures grew at an annual rate of 3.6%, faster than both the economy’s growth rate (2.2%) and the rate of inflation (1.5%). As Americans spend more on healthcare, policymakers are faced with the challenge of guaranteeing health insurance coverage to all Americans, while also making it affordable (Sanger-Katz et al. 2014). However, research shows that the US spends more on healthcare than any other OECD country, and yet our health outcomes are no better than most OECD countries (Squires 2012). Therefore, policymakers are looking to reform the healthcare system in ways that will make it more efficient and improve the quality of care that it provides. My research focuses on how healthcare providers decide to treat their patients. It contributes to a growing literature in health economics that identifies inefficiencies in the healthcare system by identifying inefficiencies in how providers treat patients. Examples of inefficiencies include situations in which healthcare providers supply medical care that does not provide health benefits or situations in which the same medical care could have been provided in a lower cost setting. Inefficiencies persist in healthcare markets due to information asymmetries. Healthcare providers know more about medical care than their patients and patients are often unable to differentiate between high and low-quality providers. As a result, research has shown that similar patients often receive different care from different healthcare providers. Motivated by the idea that the same patients can receive different medical care from different healthcare providers, my dissertation discusses three reasons why physicians have different practice styles. The first chapter focuses on the fact that physicians have different medical training and experience. The second chapter discusses how physicians are exposed to different degrees of medical malpractice liability. The third chapter describes how physicians are members of different health insurance networks. I find that all three reasons explain physician practice style, but that health insurance networks have the largest effects on healthcare efficiency. As a health economist, it is important to use quasi-experimental research methods to isolate the determinants of physician practice style, so each chapter in my dissertation relies on a different quasi-experimental method to show how physicians make decisions involving patient care. These methods help to overcome the biases inherent in health economics research, such as when patients select their physicians or when physicians select their patients. My dissertation also uses detailed data on physicians and patients to show not only how patient care varies across physicians, but also how patient care varies within physicians over time. In this way, my dissertation reveals the degree to which physician practice style is malleable and responsive to incentives. In the following paragraphs, I provide a brief description of each dissertation chapter and I discuss my goals for future research. Chapter 1 asks whether physician characteristics explain efficient practice style, where an efficient physician generates the lowest possible costs for a given set of health outcomes. This chapter was motivated by the economics of education literature where researchers seek to find the characteristics of effective teachers. Chapter 1 focuses on patients with minor injuries who should not receive different medical care from different physicians. The quasi-experimental method uses the fact that, within hospital emergency rooms (ERs), patients with minor injuries are as good as randomly assigned to ER physicians. The results reveal that the only observable physician characteristic that explains differences in practice style across physicians within the same ER is physician experience. Experienced physicians prescribe fewer procedures and charge less per visit, with no differences in health outcomes. Similar to the teacher experience literature, however, the gains to physician experience are largest within the first two years and then they quickly taper off after that. Therefore, inexperienced physicians are the least efficient providers of urgent, but routine healthcare. Chapter 2 pivots away from physician characteristics and towards malpractice liability. Several papers have shown how changes in tort law affect physician practice style, but no papers have shown whether physicians change their labor supply in response to their own malpractice claims. This chapter uses an event study method and a propensity-score matched difference-in-difference method to show how physicians adjust their labor supply in response to their own malpractice claims. Malpractice claims represent adverse medical events and I measure physician responses from the date that the event was reported. I focus on physicians who regularly treat hospitalized patients and I test whether they are less likely to work in hospitals after they receive malpractice claims. The results reveal that physicians treat fewer patients as attending physicians in hospitals after they receive claims. The same physicians, however, do not reduce their outpatient volume or their operating room volume. Moreover, physicians with malpractice claims related to patient deaths drive the labor supply responses. The labor supply responses persist for at least three years, suggesting that some types of malpractice claims can have permanent effects on physician practice style. Chapter 3 investigates whether patients receive different hospital care depending on their health insurance coverage. The quasi-experimental method relies on a Florida Medicaid reform that mandated that Medicaid beneficiaries in certain counties switch from the state’s fee-for-service (FFS) system to managed care plans. One of Chapter 3’s goals is to see whether Medicaid patients received different hospital care post-reform. I find that some Medicaid managed care patients received lower-cost hospital care compared to the FFS patients, primarily because the managed care patients were treated by lower-cost ER physicians. However, I also find that managed care plans in different markets constructed their physician networks in different ways. For example, I find that health maintenance organizations (HMOs), which are owned and operated by insurance companies, were less likely to expand their low-cost ER physician networks when they faced competition from a vertically integrated, hospital-owned plan. This finding explains why not all Medicaid managed care patients received different hospital care; HMOs were not able to contract with low-cost ER physicians in every market. Though most of my research has been focused on physician-level decision-making, my interests are evolving to include market-level analyses. In addition to determining how physicians respond to changes in incentives, I would like to understand why incentives change in the first place. Over the next year I will work with two new data sets, one of which I will use to provide additional evidence on how managed care plans choose their provider networks in different markets. The other data set I will use for a project related to financial incentives and physician prescribing behavior. In addition to these two projects, I am interested in managed care plan entry and exit into public health insurance markets and vertical integration in public health insurance markets. There is very little empirical research on vertical integration in healthcare markets because it is a relatively new phenomenon. Nevertheless, Gaynor, Ho, and Town (2014) write, “Various forms of restraints and integration between physicians, hospitals, and insurers are being developed, which provides opportunities for industrial organization economists to learn about the impacts of these arrangements."

This dissertation studies the agricultural sector in the United States. The first two chapters investigate the U.S. agricultural economy during the Great Depression, while Chapter 3 looks at the effects of air pollution on crop yields in recent years. In Chapter 1, Laurence Wilse-Samson and I examine the widespread migration to farms in the U.S. during the Great Depression. We show that the option to move to farms serves as informal insurance during times of economic crisis, and that modernization in the agricultural sector reduces the ability of the land to provide this insurance function. The movement to farms also has spillovers on the broader economy, facilitating a decline in market-based expenditure and a shift into home production. At the same time, by absorbing surplus labor, the subsistence farm sector puts upward pressure on nonfarm wages and thus provides a countervailing force against deflation. We also provide evidence that the introduction of formal unemployment compensation reduces the movement to farms later in the decade. Our results bring attention to a less-studied effect by which formal insurance stabilizes the economy during deep crises: it increases market demand by diverting consumption away from home production and towards market-based expenditure. Chapter 2 examines the effects of the Great Depression on out-migration from farms, and how those effects vary across different groups of agriculturalists. Using complete count data from the U.S. population census, I match a sample of individuals from the 1930 census to their records in the 1940 census. Because the 1940 census includes information on location and farm status in 1935, this linked sample provides information on location and farm status for the years 1930, 1935, and 1940, allowing me to follow individuals over the course of the Great Depression. I show that farmers in mechanized agricultural regions are more likely to leave their farms during the crisis, compared to farmers in less mechanized regions, but they are no more likely to transition to the non-farm sector. While tenant farmers are in general more likely to out-migrate compared to farm owners, this differential is even larger in the more mechanized, high-productivity areas. And while farm owners from more productive regions end up earning higher incomes than owners in less productive areas, there is no corresponding earnings premium for tenant farmers. These results suggest that the benefits from productivity-enhancing technological progress accrue to the owners of the land resources, while the costs of the farm crisis (in terms of displacement) are borne heavily by renters. Finally, I show that places with high levels of farm mortgage debt experience higher rates of out-migration, and their residents report lower subsequent income; in addition, the negative effects of mortgage debt on income are more heavily concentrated among farm owners. In Chapter 3, Wolfram Schlenker, Juha Siikamaki and I provide new empirical evidence of a possible nonlinear effect of ozone on corn yields using data for the years 1993-2011 from a comprehensive sample of the Eastern United States that accounts for 91% of U.S. corn production. Our county-level panel analysis links observed historic corn yields to various air pollution measures constructed from fine-scaled hourly pollution monitor data. We find a statistically significant critical threshold of 72 ppb for hourly daytime ozone, considerably higher than the 40 ppb threshold derived in controlled experiments that is used as a standard in Europe. The reduction in peak ozone levels is responsible for 41% of the observed trend in average yields in 1993-2011. Our results improve the understanding of the benefits from environmental regulations and contribute to better projections of future agricultural yields and long-term commodity prices.

This dissertation comprises three chapters which cover two main topics. The first chapter provides a study on the quality of life of cities in Senegal, and the last two chapters analyze the effects of the adoption of value-added taxation on manufacturing firms in Ethiopia. Rapid urbanization in developing countries has been attributed to higher incomes in cities. However, the prevailing view is that the productivity benefits of cities need to be traded off with lower quality of life. I provide in the first chapter, to my knowledge, the first study of quality of life and location preference of urban and rural locations in a developing country. I develop a new empirical methodology based on discrete choice and spatial equilibrium models. Unlike in previous studies where estimates of location preferences are based on variations in real wages across locations, I estimate preferences directly from observed choices. I exploit unique location choice data of public school teachers whose nominal wages are fixed across locations to recover quality of life indices and obtain revealed preference rankings over locations. These rankings indicate teachers prefer cities despite lower real wages. Standard spatial equilibrium estimates from previous literature give different preference rankings for teachers. Thus I use my estimates to show how the standard methodology needs to be adjusted. The adjusted measures show that cities have higher quality of life than rural areas for all workers. These results have important implications for place-based policies, and for policies to bring high-quality public sector workers to rural areas. A key challenge in the implementation of value-added tax (VAT) is setting an appropriate threshold level of turnover at which firms are obliged to register for the tax because a high threshold lowers tax revenue while a low threshold imposes high compliance costs for both small firms and the government. In the second chapter, Mesay Melese and I, analyze the behavior of Ethiopian manufacturing firms around the government implemented VAT threshold of 500,000 Birr ($25000) after the adoption of VAT in 2003. Using bunching estimation techniques, we show the existence of firm bunching around the threshold: bunching firms lower reported revenue by 48,000 Birr in order to avoid registration. This suggested firm response to the threshold can help governments be more informed about how to choose an optimal VAT threshold. To remedy their low fiscal capacity problem, many developing countries have adopted value added taxation because it is believed to raise tax revenue and improve production efficiency of firms. In the third chapter, Mesay Melese and I, study the impact of the adoption of the VAT on firms by analyzing the introduction of VAT in Ethiopia in 2003 using panel data of manufacturing firms (1996-2009). By law, a firm is required to register for VAT if it is big (its revenue is higher than 500,000 Birr); otherwise the firm is small and faces a much lower turnover tax rate. Using a difference in differences strategy with big firms as treatment and small firms as control, and excluding firms that might potentially bunch around the threshold: we find that for big firms taxes paid, reported revenue, taxes paid out of revenue, value added, and raw materials use increase while the share of inputs in revenue falls. These results suggests VAT increased both revenue efficiency and production efficiency.

This dissertation studies the U.S. mobile telecommunications industry, with a particular emphasis on the incentive to maintain antenna facilities, or base stations, to produce better signal quality. It combines insights from economic analysis to draw inferences from unique datasets for the state of Connecticut. Chapter 1 gives a broad overview of the industry and highlights the apparent importance of signal quality as a driver of demand. Publicly available information reveals that plan features, phone selection, and pricing seem to be less determinant of overall quality relative to the quality of the call network. Reduced form evidence from proprietary data on demand and base station location data from Connecticut confirm that signal quality is important and that base stations are important to signal quality. Given the importance of base stations, Chapter 2 asks what are the competitive incentives to provide them and how would these incentive change in proposed mergers between two of the four largest firms in this industry. To answer this question, I use proprietary demand data and base station locations to estimate a structural model of supply and demand in this industry. I use a measure of land use regulation stringency from data on Connecticut zoning codes as instruments for the costliness of construction. Overall, I find base stations to have important competitive implications, as they represent a significant proportion of costs. Simulating mergers between AT & T and T-Mobile and Sprint and T-Mobile, I find the mergers induce increased differentiation between merging partners, a finding consistent with the previous literature. However, the natural efficiency of being able to use a single network instead of two can make the mergers welfare-improving. The results imply that merger reviews in industries with networks should investigate the scope of network integration as potentially important efficiency. Chapter 3 expands on the instrumental variable in Chapter 2 and explores how exactly land use regulation impacts the incentives of firms to invest across different jurisdictions. I use a border discontinuity approach that looks at sites placed near town borders and compares the relative stringency of regulation between bordering towns. To measure the stringency of regulation, I use both researcher-coded measures from manual inspection of the regulations and measures derived from the computational linguistic technique of Latent Dirichlet Allocation topic modeling. I confirm that regulations that impose more burdens for applicants are associated with fewer sites and regulations that improve clarity are associated with more sites. A simple counterfactual shows that regulation has only a modest effect on the reallocation of facilities across towns, holding the number of facilities fixed. Overall, these chapters clarify the role and costs of an important kind of quality provision in a major industry. They contribute significant insight for policy in both merger review and land use regulation. The second chapter is the first paper to treat signal quality as an endogenous characteristic in a study of the wireless telecommunications industry. The last chapter introduces to the economics literature topic modeling in the analysis of regulatory effects and statutory clarity as a regulatory concern.

This dissertation contains three essays on Public Economics, Labor Economics and Political Economy. The common theme across all the chapters is Public Economics: either understanding the effects of government policies in order to improve their design, or how the design of electoral rules affects government spending and tax collection. The first chapter estimates the employment and wage effects of payroll tax credits at different moments of the life cycle. In 1997, Spain reduced payroll taxes for new hires younger than 30 and older than 45. Time variation and age discontinuities allow me to perform both a difference-in-difference analysis and a regression discontinuity design. Using administrative data, I find that employment at age 30 increased by 2.42%. Moreover, I show that the gains do not come at the expense of non-subsidized workers, indicating that the policy led to net job creation. Wages of new hires are not affected by the reform. In contrast, the tax cut at 45 had no effect on employment or wages. For prime-age workers, the lower payroll taxes can be interpreted as a transfer from taxpayers to firms. Combining the above estimates and standard tax incidence formulas, I obtain a lower bound labor demand elasticity of -0.63 at age 30 and zero for workers who are 45 years old. An analysis of wage densities and other observable characteristics supports the conjecture that the elasticity decreases with age because the quality of available workers decreases with age. I consider several alternative explanations for the results, but none of them are consistent with the evidence. A cost-benefit analysis shows that payroll tax receipts would increase if the tax rate for workers under 30 was reduced. The results at age 45 suggest low efficiency costs of payroll taxes for prime-age workers. Finally, I discuss implications for payroll tax reforms, welfare-to-work schemes, and job-search assistance. The second chapter studies how changes in electoral rules affect spending on local public goods, taxation, and redistribution. The Voting Right Act guaranteed the right to vote for minorities, including the prohibition of any electoral discriminatory practices on the basis of race. This triggered a series of court decisions outlawing discriminatory electoral rules between 1970 and 1990. I study the effects of several court orders that guarantee minority representation on city public budgets, and find that both local public good expenditures (5-7.5%) and city tax collection (5-10%) increased, after the changes towards non-discriminatory electoral rules. I also explore the distributional consequences of non-discriminatory elections and find that the fraction of black public workers and citizens increased after changes in the election system, while those of whites decreased. The growth rates of black house values and rents also increase more. The findings are inconsistent with a negative effect of ethnic heterogeneity in the city council on public goods, and with common-pool theories. I show evidence that the most plausible channel that explains the results is the new legislative bargaining power that black communities gained. The third chapter investigates the effects of partial employment protection reform in Spain. Most employment protection reforms in Europe have been partial. They aim to introduce flexibility at the margin by targeting new hires and placing restrictions on which firms can hire with lower levels of EP. However, it is not clear what the right way to target jobs at the margin is. We exploit a unique quasi-experiment in Spain that decreased employment protection of new permanent hires who were younger than 31 between 2001 and 2006. Only firms with very low employment volatility could hire with lower levels of EP. Using an administrative dataset, we show that the reform had no effect on hirings, lay-offs, quits, contract length, starting wages and post-entry wages. We compare the results for the policy in 2001-2006 with a similar policy in 1999-2000, but that instead of restricting which firms could benefit from it, it targeted only workers who had not been in a permanent contract for a certain time. The 1999-2000 policy had significant effects on hiring. Overall, the evidence suggests that restrictions on which workers can benefit from the policy are better at targeting marginal jobs than constraints that exclude firms with high levels of employment volatility.

This dissertation contains three essays on Macroeconomics about the importance of information and expectations in the aggregate economy. The first chapter studies empirically and theoretically how the interest rate set by the central bank affect the economy through the effects that the announcement of the decisions has on people's forecasts of economic conditions. Using Brazilian Survey data that reports daily statistics, this chapter studies how forecasts of inflation and output growth respond to unexpected policy rate decisions. The results show that inflation forecasts increase in the short run after an unexpected increase in the policy rate and show a mild decrease 1 year after the meeting. Output forecasts, when measured by industrial production growth also increase in the short run, but less strongly than inflation. When measured by the growth in gross domestic product, show no response. The theoretical section develops a New Keynesian model with a signaling role of the interest rate. The empirical results can be explained when firms possess less information than the central bank at the time they see the interest rate and they interpret "enough" of the surprise in the rate as information about the current natural rate of interest. The second chapter studies if standard theory supports the "Neo-Fisherian" proposition, in which low nominal interest rates may themselves cause inflation to be lower. The fact that standard models of the effects of monetary policy have the property that perfect foresight equilibria in which the nominal interest rate remains low forever necessarily involve low inflation (at least eventually) might seem to support such a view. Here, however, we argue that such a conclusion depends on a misunderstanding of the circumstances under which it makes sense to predict the effects of a monetary policy commitment by calculating the perfect foresight equilibrium consistent with the policy. We propose an explicit cognitive process by which agents may form their expectations of future endogenous variables. Under some circumstances, such as a commitment to follow a Taylor rule, a perfect foresight equilibrium (PFE) can arise as a limiting case of our more general concept of reflective equilibrium, when the process of reflection is pursued sufficiently far. But we show that an announced intention to fix the nominal interest rate for a long enough period of time creates a situation in which reflective equilibrium need not resemble any PFE. In our view, this makes PFE predictions not plausible outcomes in the case of policies of the latter sort. According to the alternative approach that we recommend, a commitment to maintain a low nominal interest rate for longer should always be expansionary and inflationary, rather than causing deflation; but the effects of such "forward guidance" are likely, in the case of a long-horizon commitment, to be much less expansionary or inflationary than the usual PFE analysis would imply. The final chapter introduces asymmetric information in a simple stochastic general equilibrium model with endogenous default. It shows that when foreign lenders price sovereign assets with less information than the government, the volatility of spreads increases substantially. This increase in volatility is mainly due to an increase in debt and a strong increase in spreads when output of the country is relatively low and foreign lenders believe that it is higher. In other scenarios, the behavior of spreads is similar to the symmetric information case. For an empirically plausible level of noise, the model implies a better fit to data in spread-related statistics without harming the fit on other areas. It is also shown that when the noise of the signal increases, there is a non-monotonic relation between the noise and business cycle statistics.