This dissertation studies the interrelations between housing markets and monetary policy from three different perspectives. First, it identifies housing finance specific shocks and analyzes their impact on the broader economy and, most importantly, the systematic monetary policy reaction to such mortgage sector disturbances. Second, it investigates the implications of the institutional arrangement of a currency union for the potential buildup of a housing bubble in a member country of the monetary union by, inter alia, fostering border-crossing capital flows and ultimately residential investment activity. This dissertation, third, quantifies the effects of autonomous monetary policy shifts on the macroeconomy and, in particular, on housing markets by conditioning on financial sector conditions. From a methodological perspective, the dissertation draws on time-series econometrics like vector autoregressions (VARs) or local projections models. / In dieser Dissertation werden die Wechselwirkungen zwischen Geldpolitik und Immobilienmärkten empirisch untersucht. Hierbei beleuchtet die Arbeit potentielle Interaktionen aus drei unterschiedlichen Perspektiven: Erstens wird die systematische Reaktion von Geldpolitik auf veränderte Immobilienfinanzierungskonditionen untersucht. Zweitens wird der Einfluss des institutionellen Rahmens einer Währungsunion auf die Entstehung von Immobilienblasen in Teilen der Währungsunion analysiert und drittens werden die Effekte exogener Zinsimpulse auf die Makroökonomie und vor allen Dingen auf Häusermärkte quantifiziert, wobei für die Analyse solcher Effekte explizit Interdependenzen mit Finanzmarktkonditionen Berücksichtigung finden. Methodisch kommen zum Zwecke dieser Analysen vor allem zeitreihenökonometrische Ansätze wie Vektor-Autoregressionen (VAR) oder lokale Projektions-Modelle zur Anwendung.

A Web site engagement scale is suggested that serves as the basis of a two part-model. The first part studies the influence of the online comparative behaviour of consumers on Web site engagement using data obtained from respondents that selected a holiday package on an online travel agency capable of remotely tracing and recording their intra-Web page and intra-Web site behaviour. The second part of the model studies the influence of Web site engagement on consequences highly relevant for online marketers. The results confirm that the Web site engagement construct has five dimensions: positive affect, focused attention, challenge, curiosity and involvement. Likewise antecedents and consequences of Web site engagement are confirmed. The model is estimated with partial least squares path modelling (PLSPM). / En esta investigación se propone una escala de “enganche con sitios Web” que sirve de base para un modelo con dos partes. En la primera parte se estudia la influencia del comportamiento comparativo online de consumidores utilizando datos obtenidos a partir de encuestados que escogieron un paquete vacacional en una agencia de viajes online capaz de registrar remotamente el comportamiento intra-página Web e intra-sitio Web. En la segunda parte del modelo se estudia la influencia del constructo enganche con sitios Web sobre consecuencias de relevancia para online marketers. Los resultados confirman que el constructo enganche con sitios Web tiene cinco dimensiones: afecto positivo, atención centrada, curiosidad, implicación y reto. Asimismo se confirman antecedentes y consecuencias de este constructo. La metodología de estimación se basa sobre modelización estructural con partial least squares path modelling (PLSPM).

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

Macroeconomics research has made a quantum leap in the past decade in establishing a new workhorse model for open economy analysis. The unique characteristic of this literature is the introduction of the financial system in a dynamic general equilibrium (DGE) model which is based on microfoundations. Its introduction in a DGE model is essential to explain empirical facts such as growth differences across countries. The aim of this thesis is to show whether the behavior of growth can be explained by financial development within a classical approach. The model's ability to explain growth by setting financial development as a causal factor is tested against the model's performance to explain growth via setting the human capital as a causal factor. The question proposed and answered in this thesis is the following: Can an increase in productivity be produced by a development in the financial system or in the educational system and if so, is growth determined by this increase in productivity? The empirical performance of DSGE models is under scrutiny by researchers. This thesis is introducing the reader to a fairly new and unfamiliar testing procedure; indirect inference which is fully explained and applied. The idea of the thesis is to provide a better identified model compared to the already established econometric models on the financial development and growth nexus. The procedure followed is firstly to set up a well-established microfounded model and then to connect it to the theory via an establishment of the time series properties of various macroeconomic variables. The results based on 10 sample countries indicate that setting financial development as a causal factor explains the data behavior of macroeconomic variables better than a model which considers human capital as a driver of economic growth. 1

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Recent data shows that more than £440 billion in cash has been piling up in the accounts of UK companies. At the same time, the investment outlays and corporate payouts have reached a 60-year low. What makes firms hold such enormous cash stocks instead of spending them on investment or returning them to shareholders? To what extent has the rising degree of uncertainty about macroeconomic conditions affected companies’ decisions? In this thesis we try to address these questions and, controlling for cyclical changes and financial factors, quantify the extent to which macroeconomic uncertainty has affected investments, cash holdings and equity payouts of UK companies. In the first substantive chapter we describe how information about macroeconomic uncertainty can be obtained from surveys of professional forecasters by applying a method initially proposed by Lucas (1972). We construct a theoretical model in which professional forecasters combine predictions based on public information with private beliefs which are defined as predictions based solely on private information sets. In the model, the combination of predictions produced on the basis of public and private information sets leads to a combined forecast which is reported by forecasters in their regular statements. We extract private beliefs from reported forecasts and then use them to construct our measure of macroeconomic uncertainty. The use of predictions based on private knowledge instead of reported forecasts makes our measure of macroeconomic uncertainty distinct from other uncertainty proxies and highlights the important role of beliefs as the driving force of uncertainty. Based on the measure constructed here we conclude that macroeconomic uncertainty increases either when the overall volatility of the underlying economic processes increases or when economic conditions are perceived as more changeable. We then take the model to the data using outcomes of surveys of economic forecasters and compute a measure of macroeconomic uncertainty for the UK and the US. The results point to an interesting phenomenon. In both countries the most variation in macroeconomic uncertainty comes from changes in the perceived volatility, and not from changes in the volatility of underlying economic processes. Moreover, a comparison of our measure of macroeconomic uncertainty with other uncertainty proxies reveals that in the US our uncertainty measure is most similar to an uncertainty proxy based on disagreement among forecasters, while in the UK it is most similar to an uncertainty proxy based on average variance reported by professional forecasters. Furthermore, it appears that the period of elevated uncertainty in the UK was more prolonged than it has been believed so far. In the second substantive chapter we examine the effects of uncertainty on corporate investments of a large panel of UK companies between 1998–2012 using the measure described earlier. Our regression equation is based on an extended version of a Tobin’s Q model and is estimated by the system GMM estimator. Apart from including the value of Tobin’s Q, which captures the ratio of the market value of capital to its book value, we also control for cash flow ratios, sales dynamic, individual uncertainty, business cycle and macroeconomic uncertainty. Our hypothesis is that macroeconomic uncertainty, defined as the expected volatility of the purely unforecastable component of the GDP growth rate conditional on information available at time t, negatively affects corporate investment ratios. We find indeed that a surge in macroeconomic uncertainty measured in this way is linked to a significant fall in investment ratios even after controlling for cyclical changes and a range of other factors. We also show that the effect of macroeconomic uncertainty on corporate investment is mainly driven by companies that are averagely financially constrained. These results are consistent with theories suggesting that the asymmetry of information is an important channel in the investment-uncertainty relationship and validate our measure of uncertainty. In the third substantive chapter we analyse the effects of changes in the degree of macroeconomic uncertainty on corporate cash management practices. Our analysis indicates that an increase in the degree of uncertainty about macroeconomic conditions leads to an increase in corporate cash holdings even after controlling for a range of factors. We also find that the effects of macroeconomic uncertainty are particularly strong among the most financially constrained companies. Such companies increase cash holdings significantly more than the less financially constrained companies. To complete the analysis of cash management practices we show that in uncertain times firms pay out lower dividends and reduce share buybacks. These results suggest that when uncertainty is rising firms adjust payout policy to obtain additional cash which they use to hedge unpredictable future cash flows. Our empirical results are consistent with the theoretical findings made by Almeida et al. (2004) and Han and Qiu (2007). Two important policy implications can be drawn from these results. First, if policy makers want to encourage companies to reduce their excessive cash holdings, which are sometimes referred to as “dead money”, they need to address sources of uncertainty which induces companies to accumulate cash in order to hedge unpredictable future cash flows. Second, smaller, less mature companies tend to be particularly affected by uncertain economic conditions. Well-designed policy needs to be developed that would address the problem of credit tightness and asymmetry of information between lenders and borrowers which may lead to suboptimal level of investment and excessive cash stocks in years when macroeconomic uncertainty is particularly high.

The papers in this thesis explore the political economy of the macroeconomic imbalances that built up between advanced democracies during the Great Moderation—the long period of reduced macroeconomic volatility and low inflation that preceded the global financial crisis. More specifically, the papers focus on the role that institutions, political systems and electoral politics, and government demand-side policies played in the imbalances that emerged in real exchange rates and current accounts. The first paper uses macroeconomic data on OECD economies and a new statistical approach for causal inference in observational studies—the synthetic control method—to estimate the effect of the European Monetary Union (EMU) on the current account balances of individual member states. This counterfactuals approach provides strong evidence that the introduction of the EMU was responsible for the divergence in current account balances among member states. The second paper maps out the complex set of interrelationships between varieties of capitalism, growth models, and political systems in advanced democracies. The new approach to comparative political economy developed in the paper provides a theoretical framework that helps explain the current account divergence between the export-led coordinated market economies (CMEs) and the consumption-led liberal market economies (LMEs). The third paper brings modern macroeconomics back into political science. The paper sets out a suite of simple open economy macroeconomic models and uses them to show how governments pursuing different demand-side policies can result in persistent current account imbalances between countries within a system of independent inflation-targeting central banking. Taken together, the papers provide important theoretical arguments and empirical evidence on the political (and political economic) drivers of the macroeconomic imbalances that were a crucial precursor to the worst global economic downturn since the Great Depression of the 1930s.

This thesis deals with different types of uncertainty in various macroeconomic contexts and investigates ways in which these can be accommodated by adopting flexible techniques that allow a robust inference in estimation, testing and prediction. This thesis covers a wide range of aspects in macroeconomic analysis, including the choice of an appropriate unit root test, inference when the presence of breaks and the autocorrelation properties of data are unknown, characterisation of inflation dynamics when structural and specification uncertainty are present, as well as model uncertainty in forecasting when real-time data are available. Chapter 1 presents the general motivations and describes the main research objectives and methodology for each chapter, providing a thesis outline at the same time. Chapter 2 examines the behaviour of OLS-demeaned/ detrended and GLS-demeaned/ detrended unit root tests that employ stationary covariates in situations where the magnitude of the initial condition of the time series under consideration may be nonnegligible. We show that the asymptotic power of such tests is very sensitive to the initial condition; OLS- and GLS- based tests achieve relatively high power for large and small magnitudes of the initial condition, respectively. Combining information from both types of test via a simple union of rejections strategy is shown to effectively capture the higher power available across all initial condition magnitudes. In Chapter 3, we consider a two-step procedure for estimating level break size(s) when the presence of the structural break(s) is uncertain and when the order of integration of the data is unknown. In other words, we deal with uncertainty over the appropriate filtering of the data, as well as structural uncertainty over the existence of a break. Our approach is motivated by the well known interplay between the unit roots and structural changes: Evidence in favour of unit roots can be a manifestation of structural changes and vice versa. The proposed procedure is shown to exhibit substantial accuracy gains in estimating the level break-size and breakpoint. Chapter 4 provides a characterisation of U.S. inflation dynamics within a generalised Phillips Curve framework that accommodates uncertainties about the duration a given Phillips Curve holds and the specification of the relationship, in addition to parameter and stochastic uncertainties accommodated within a typical Phillips Curve analysis. Our approach is based on an innovative method to deal with such uncertainties based on Bayesian model averaging techniques. Employing data for the U.S. in the period 1950q1- 2012q4, the estimated version of the "meta" Phillips Curve provides an interesting characterisation of inflation dynamics which is in accordance with a number of distinguished studies. Chapter 5 investigates the extent to which nowcast and forecast performance is enhanced by the use of real-time datasets that incorporate past data vintages and survey data on expectations in addition to the most recent data. The paper proposes a modelling framework and evaluation procedure which allow a real-time assessment and a final assessment of the use of revisions and survey data judged according to a variety of statistical and economic criteria. Both survey data and revisions data are found to be important in calculating density forecasts in forecasting the occurrence of business cycle events. Through a novel "fair bet" exercise, it is shown that models that incorporate survey and/or revisions data achieve higher profits in decision-making. The analysis also highlights the need to focus on future growth and inflation dynamics relevant to decision-makers rather than relying on simple point forecasts.

Within the EU region the EU member states, by discarding their right to exercise fiscal and monetary policy independently, have signed up to a set of rules and regulations that will eventually lead to European and Monetary Union (EMU). These set of rules as reflected by both the Maastricht criteria as well as the Stability and Growth Pact, contain no reference to either the unacceptable levels of European unemployment or the balance of trade position. The ensuing wave of criticism directed at the motivation as well as the rationale behind such a stringent set of rules and regulations has caused a lot of uncertainty to emerge as to what the future of such an economic venture would be. The primary objective of this thesis is to investigate the existing problem of European unemployment within the new economic environment that emerged after the demise of Bretton Woods and most crucially after the ratification of the Maastricht Treaty. Further, it develops an alternative demand-based macroeconomic framework on the basis of which the undertaken econometric analysis provides evidence in support of our approach. In particular, by examining the way macroeconomic policy has evolved after the demise of Bretton Woods and questioning the premise with which the new economic orthodoxy has established its authority in euroland, we review the current position of EMU countries in relation to the convergence criteria. It is argued that the deflationary bias in conjunction with the institutional arrangements peculiar to an independent European central bank (ECB) undermine the potential of future economic policies to deal with persistent levels of unemployment. Moreover, it is sustained that the absence of a strategy tailored to stimulate economic activity together with the underlying deflationary nature implied by convergence criteria, may be potential factors that contribute to the perpetuation of high levels of unemployment. Lack of demand in conjunction with the prevalent instability in the labour markets have harmed productive efficiency and most importantly the creation of additional capacity on which employment could be encouraged. Therefore, a case for policies designed to boost aggregate demand is made. In pursuing our objective, a post Keynesian macroeconomic framework provides the theoretical underpinnings on which the empirical investigation is based. On the methodological front, panel data analysis is applied to EU countries. The results obtained suggest that unemployment in Europe is a by-product of economic policies devoid of any measures to affect demand as well as supply factors. Moreover, on the basis of the evidence, the deflationary bias that characterises the EU economies especially after the ratification of the Maastricht treaty appears to have dampened economic activity and hence employment in most EU member states. Some further investigation into the rationale behind the introduction of the Stability Pact yields additional evidence casting considerable doubts on two of the most fundamental reasons put forward in defence of the Stability pact, namely the fear for interest rate spillovers across the EU economies and the significant role of national savings in conditioning investment. Finally a concluding chapter provides some alternative policy recommendations.