Presented here are consumption and production related asset pricing models which seek to explain stock market behaviour through the stock premium over risk-free bonds and to do so using parameter values consistent with theory. Our results show that there are models capable of explaining stock market behaviour. For the consumption-based model, we avoid many of the suggestions to artificially boost the predicted stock premium such as modelling consumption as leverage claims; instead we use the notion of surplus consumption. We find that with surplus consumption, there are models including the much-maligned power utility model, capable of yielding theory consistent estimates for the discount rate, risk-free rate as well as the coefficient of relative risk aversion, y. Since real business cycle theory assumes a risk aversion coefficient of 1, we conclude that our model which gives a value close to but not equal to 1, provides an indication of the impact of market imperfections. For production, we present many of the existing models which seek to explain stock market behaviour using production data which we find to be generally incapable of explaining stock market behaviour. We conclude by presenting a profit based formulation which uses deviations of actual from expected profits and dividends via stock price reaction parameters to successfully explain stock market behaviour. We also conclude that the use of a profit based formulation allows for a link to investment, output and pricing decisions and hence link consumption and production.

This thesis consists of four essays in empirical macroeconomics. What Are the Effects of Fiscal Policy Shocks? A VAR-Based Comparative Analysis The literature using structural vector autoregressions (SVARs) to assess the effects of fiscal policy shocks strongly disagrees on the qualitative and quantitative response of key macroeconomic variables. We find that controlling for differences in specification of the reduced-form model, all identification approaches used in the literature yield similar results regarding the effects of government spending shocks, but diverging results regarding the effects of tax shocks. The Analytics of SVARs. A Unified Framework to Measure Fiscal Multipliers Does fiscal policy stimulate output? SVARs have been used to address this question, but no stylized facts have emerged. I show that different priors about the output elasticities of tax revenue and government expenditures implied by the identification schemes generate a large dispersion in the estimates of tax and spending multipliers. I estimate fiscal multipliers consistent with prior distributions of the elasticities computed by a variety of empirical strategies. I document that in the U.S. spending multipliers are larger than the tax multipliers. Computing DSGE Models with Recursive Preferences and Stochastic Volatility This paper compares solution methods for computing the equilibrium of dynamic stochastic general equilibrium models with recursive preferences and stochastic volatility. The main finding is that a third-order perturbation is competitive in terms of accuracy with Chebyshev polynomials and value function iteration, while being an order of magnitude faster to run. Business Cycle Accounting and Misspecified DSGE Models This paper investigates how insights from the literature on business cycle accounting can be used to trace out the implications of missing channels in a baseline estimated dynamic stochastic general equilibrium model used for forecast and policy analysis.

I find evidence of predictability in out-of-sample data for four risk premia using simple econometric models. Two factor return models are used, an APT model and the Wilshire Atlas. I demonstrate that investors can exploit conditioning information to manage their exposures to risk factors. The results suggest that the investment opportunities set changes in a large and an economically significant way. I show that the growth rate in money supply and trend in stock market valuations are the main drivers respectfully of the risk premia associated with the Book-to-Market and Size factors from the Wilshire model. The predictability results are mixed with respect to Business Cycle Theory. At times investors price business cycle risk while at other times they exhibit herding tendencies.

Baigiamajame darbe analizuojamos Lietuvos ir Estijos fiskalinės politikos verslo ciklo atžvilgiu. Tiriama, kaip kito valstybių taikoma fiskalinė politika keičiantis verslo ciklo momentams ir valdančių partijų ideologijoms. Darbo tikslas: suformuoti metodiką fiskalinės politikos vertinimui verlso ciklų atžvilgiu. Pirmiausia, ištirta mokslinė fiskalinės politikos, ekonomikos augimo modelių ir valdančių partijų ideologijų teorija. Ja remiantis suformuotas modelis, paremtas Cobb-Duglas ekonomikos augimo veiksniais: darbu ir kapitalu. Sukurtu modeliu tiriama bendrojo vidaus produkto pokyčio priklausomybė nuo dirbančiųjų skaičiaus, bendrojo kapitalo formavimo ir asignavimų pasikeitimo. Tyrimo rezultatai atskleidė, kad modelis neparodo fiskalinės politikos ir verslo ciklų ryšio. Valstybės asignavimai gauti kaip statistiškai nereikšmingi bendro vidaus produkto pasikeitimui. Bendram fiskalinės politikos įvertinimui naudotas lyginamosios dinamikos metodas, kuriuo remiantis Lietuva ir Estija vykdo prociklines fiskalines politikas, nepriklausomai nuo valdančių partijų ideologijų. / In the thesis it is analysed fiscal policy of Lithuania and Estonia regarding to business cycle. There is made research how governments’ fiscal policy was changing by business cycle moments and main political parties’ ideologies. Thesis objective: create the methodic for fiscal policy evaluation regarding to business cycles. First of all, in the thesis was made fiscal policy, business cycles, and political parties ideologies theoretical analysis. After theoretical analysis was formed model, by Cobb-Douglas production function major factors: capital and work force. Model was used to find dependence between gross domestic product changes and gross capital forming, employees, government expenditure changes. Research showed that model doesn’t reveal connection between fiscal policy and business cycles. Government expenditure was detected like statistically insignificant for gross domestic product changes. Comparative model was used for general fiscal policy assessment, which showed that in Lithuania and Estonia it is used procyclical fiscal policy independently from political parties’ ideologies.

Bakalauro baigiamajame darbe tiriama, ar akcijų rinkos signalizavo apie ekonomikos pokyčius 2000-2012 m. laikotarpiu Baltijos šalyse. Pirmojoje darbo dalyje pateikiami teoriniai ekonominio ciklo ir jo indikatorių aspektai, analizuojamos priežastys, kodėl akcijų rinkos gali būti vadinamos ekonomikos indikatoriais bei išanalizuojami orientuojančio ryšio tarp akcijų rinkų ir ekonominio ciklo moksliniai tyrimai. Antrojoje, tiriamojoje dalyje, siekiama išsiaiškinti ar akcijų rinkos Lietuvoje, Latvijoje ir Estijoje gali būti vadinami orientuojantys ekonomikos ciklo sekos indikatoriais. Tam kad būtų ištirtas šis ryšys, buvo pasirinkti keturi makroekonominiai rodikliai (BVP, neto darbo užmokestis, mažmeninė prekyba, pramoninės produkcijos apimtis) ir grafinės analizės, Grangerio priežastingumo testo bei VAR modelio pagalba šis ryšys buvo tiriamas. Rezultatai parodė, jog tik iš dalies akcijų rinkos yra orientuojantis ekonomikos ciklo sekos indikatorius Baltijos valstybėse, nes reikšmingas ir patikimas ryšys buvo rastas tik su BVP ir pramoninės produkcijos apimtimis. / The thesis investigates if the stock markets signaled about the economic changes for the period of 2000 – 2012 in the Baltic States. In the first part of this work the theoretical overview on economic cycle and its indicator aspects are introduced. What is more, the circumstances why the stock markets can be described as economic indicators are also presented. Moreover, the scientific researches about the orientation links between the stock markets and the economic cycle are analyzed in this final work. The practical part of the work seeks to find out if the stock markets in Lithuania, Latvia and Estonia can be called leading indicators of economic cycle sequence. In order to analyze these relations, four macroeconomic indicators were chosen (GDP, net earnings, retail and volume of industrial production). With the help of graphic analysis, Granger Causality Test and VAR model this relation was analyzed. The results show that the stock markets are just partially leading indicators of economic cycle sequence in the Baltic States because the significant and reliable relation was found only with the volumes GDP and industrial production.

This study examines farm financial performance of Kentucky farms using Kentucky Farm Business Management data from 1998-2010. Logit models are used to estimate the likelihood of farm characteristics affecting whether financial ratios fall into critical zones or not. The results show that large farms in terms of total gross returns and total assets are less likely to experience repayment capacity problems. Total gross returns significantly affect all five financial measures. These findings will help farmers and lenders understand what factors influence farm financial performance. Profitability migration is tested to see if the migration probabilities differ across business cycles. Migration drift is also tested to determine if the Markov property of independence is violated. Results show substantial retention in return on equity (ROE) performance over time, and a tendency for trend-reversal if ROE changes occur. Results are compared to previous literature using ARMS data and Illinois FBFM.

The main focus of this thesis is the employment decisions of firms. The thesis consists of three self-contained but closely related essays, all enlightening employment dynamics in different ways. The thesis is mainly empirical but there are also some theoretical developments when existing theory is insufficient to explain the empirical findings. The impact on employment of product market conditions and labor market conditions facing firms are investigated. The results suggest that product demand has a robust impact on firms’ employment dynamics, but also the market price, the wage costs, and the matching between vacancies and unemployed workers seem to matter. The empirical evidence of the relevance of imperfect competition in the product market is important, particularly since most research on labor market dynamics has assumed perfect competition. The results with respect to matching of vacancies and unemployed workers contradict the standard search and matching model as well as simple efficiency-wage or bargaining models with wage rigidity and excess supply but no frictions in the labor market. A richer model of the labor market is needed to explain the results, including on-the-job search and perhaps more heterogeneity between employed and unemployed workers. Essay I, “What are the Determinants of Hiring? - The Role of Demand and Supply Factors”, studies the importance of demand and supply factors for hiring in local labor markets. Essay II, “Vacancy Matching and Labor Market Conditions”, studies the probability of filling a vacancy, how it varies with the number of unemployed and the number of vacancies in the local labor market, and what impact it has on firms’ employment dynamics. Essay III, “The Dynamics of Firms’ Factor Demand”, studies firm-level adjustments of employment, the capital stock, and inventories in response to exogenous shocks theoretically and empirically. These three decisions have typically been studied one at the time, but here they are studied together in a way which allows for interactions and a better understanding of firm behavior.

Univ., Diss.--Louvain-la-Neuve, 2007.

This thesis studies the cyclical aspect of job polarization in Europe. Contributions include offering a comparison to the findings of previous research on the United States, and extending the analysis by introducing labor market institutions. The analysis is done in two parts, first showing that the observed link between job polarization and jobless recoveries in the US is observed in Europe, but not across all countries and business cycles. In Scandinavia, the process of job polarization appears smoother than the spurts observed in the US. The second part involves regression analyses of the relationship between labor market institutions, the business cycle and occupational employment. The results indicate that stricter labor market institutions are less robustly associated with Routine employment than other occupational groups and that Routine employment is more sensitive to the business cycle than other types of employment. Further, rigid labor market institutions may prevent some of the Routine decline associated with economic downturns, while not necessarily affecting the long run employment. Limitations of the analysis regards rough estimates of the key variables, number of observations and the lack of identification associated with cross-country analyses.

Countries participating in a common currency area increase their integration within the area. This paper investigates the impact common currency areas have for economic integration with economies of different characteristic outside the area. Results for a common currency group compares to a sovereign currency group. The common currency group consists of three countries who have adopted the euro, while the sovereign currency group consist of three European countries with sovereign currencies. The level of economic integration is examined towards three different economies; European drivers, global markets and emerging markets. The period ranges from 1993M01 to 2017M09 and includes industrial production indices and stock market indices. Economic integration is studied through a DCC-EGARCH model, on both aggregated and time-dependent level, which yield correlations. In comparison to previous studies, this paper also applies a cross-quantilogram method to examine the impact of different market conditions have on the correlations. Higher correlations for the common currency group than for the sovereign currency group do exist with the European drivers and the global countries. With the emerging markets such pattern is not found, instead low correlations are mainly examined. Besides the correlation with the emerging countries, the results indicate membership in a common currency area, in this case the EMU, to increase the economic integration. Overall, highest levels of correlation are found with the European drivers, followed by the US as a global economy, corresponding with the importance of homogeneity for high economic integration. Due to no conclusive change in correlations during the euro implementation, membership in a common currency area per se does not increase economic integration. However, a common currency area with a strong currency do along with other characteristics influence the economic integration. We find evidence that market regimes have an impact on economic integration. Adverse market conditions overall seem to influence the integration in a higher degree than normal or good conditions. The results indicate that the adverse conditions increase the economic integration, this is in particularly seen for the common currency countries correlation with the European drivers and the US.