Source: Dissertation Abstracts International, Volume: 32-10, Section: A, page: 5424. / Thesis (Ph.D.)--The Florida State University, 1971.

Thesis (Ph.D.)--Indiana University, Dept. of Economics, 2006. / Source: Dissertation Abstracts International, Volume: 67-04, Section: A, page: 1449. Adviser: Michael Alexeev.

The overall theme of the three chapters is the relationship between the prices of natural gas and crude oil, and the factors that cause short run departures from the long run equilibrium price relationship. In the first chapter, we find evidence that the link between natural gas and crude oil prices is indirect, acting through competition at the margin between natural gas and residual fuel oil. We also find that technology is critical to the long run relationship between fuel prices, and short run departures from long run equilibrium are influenced by product inventories, weather, other seasonal factors and supply shocks such as hurricanes. Once establishing that this long run relationship exists, I extend my research to determine what drives this price relationship in the second and third chapters. Specifically I focus on the driving demand factors that keep these prices moving together. In the power sector, I focus on substitution between natural gas and crude oil on two levels. First, I focus on dispatch decisions and where natural gas generation falls on the stack relative to oil-fired generation. Starting with a translog functional form the paper estimates switching within NERC regions and sub-regions. However, there are some limitations with this functional form and the inability to capture this switching is made clear through an examination of plant-level switching behavior. Therefore, a new functional form is introduced that allows for an S-shaped dispatch as a function of the crude-to-natural gas relationship. This new functional form produces results that are cohesive with the plant-level switching analysis. The final chapter focuses on demand in the industrial sector. Using Texas natural gas consumption tax data, I take a sectoral look at the demand response to deviations in the long run relationship between crude oil and natural gas. I find that industries with natural gas as a feedstock are far less responsive than industries with high natural gas consumption for fuel, but not as a feedstock. I further find that certain industries, such as oil and gas production, are more responsive to local gas prices while others, such as brick manufacturing, are more responsive to hub prices. This analysis uses both OLS and IV techniques as well as correcting for dynamic panel data problems using Arrellano Bond and bias correction in the least squares dummy variable methodology.

<p>This dissertation is comprised of two chapters. In the first chapter, I investigate the role of systematic U.S. monetary policy in the presence of oil price shocks. The second chapter is devoted to studying different approaches to modeling energy demand. </p><p>In an influential paper, Bernanke, Gertler, and Watson (1997) and (2004) argue that systematic monetary policy exacerbated the recessions the U.S. economy experienced in the aftermath of post World War II oil price shocks. In the first chapter of this dissertation, I critically evaluate this claim in the context of an estimated medium-scale model of the U.S. business cycle. Specifically, I solve for the Ramsey optimal monetary policy in the medium-scale dynamic stochastic general equilibrium model (henceforth DSGE) of Schmitt-Grohe and Uribe (2005). To model the demand for oil, I use the approach of Finn (2000). According to this approach, the utilization of capital services requires oil usage. In the related literature on the macroeconomic effects of oil price shocks, it is common to calibrate structural parameters of the model. In contrast to this literature, I estimate the parameters of my DSGE model. The estimation strategy involves matching the impulse responses from the theoretical model to responses predicted by an empirical model. For estimation, I use the alternative to the classical Laplace type estimator proposed by Chernozhukov and Hong (2003). To obtain the empirical impulse responses, I identify an oil price shock in a structural VAR (SVAR) model of the U.S. business cycle. The SVAR model predicts that, in response to an oil price increase, GDP, investment, hours, capital utilization, and the real wage fall, while the nominal interest rate and inflation rise. These findings are economically intuitive and in line with the existing empirical evidence. Comparing the actual and the Ramsey optimal monetary policy response to an oil price shock, I find that the optimal policy allows for more inflation, a larger drop in wages, and a rise in hours compared to those actually observed. The central finding of this Chapter is that the optimal policy is associated with a smaller drop in GDP and other macroeconomic variables. The latter results therefore confirm the claim of Bernanke, Gertler and Watson that monetary policy was to a large extent responsible for the recessions that followed the oil price shocks. However, under the optimal policy, interest rates are tightened even more than what is predicted by the empirical model. This result contrasts sharply with the claim of Bernanke, Gertler, and Watson that the Federal Reserve exacerbated recessions by the excessive tightening of interest rates in response to the oil price increases. In contrast to related studies that focus on output stabilization, I find that eliminating the negative response of GDP to an oil price shock is not desirable.</p><p>In the second chapter of this dissertation, I compare two approaches to modeling energy sector. Because the share of energy in GDP is small, models of energy have been criticized for their inability to explain sizeable effects of energy price increases on the economic activity. I find that if the price of energy is an exogenous AR(1) process, then the two modeling approaches produce the responses of GDP similar in size to responses observed in most empirical studies, but fail to produce the timing and the shape of the response. DSGE framework can solve the timing and the shape of impulse responses problem, however, fails to replicate the size of the impulse responses. Thus, in DSGE frameworks, amplifying mechanisms for the effect of the energy price shock and estimation based calibration of model parameters are needed to produce the size of the GDP response to the energy price shock.</p> / Dissertation

<p>The dissertation consists of three essays. The first essay describes and estimates the model of bidding on eBay. Internet auctions (such as eBay) differ from the traditional auction format in that participants 1) typically face a choice over several simultaneous auctions and 2) often have limited information about rival bidders. Since existing economic models do not account for these features of the bidding environment, it should not be surprising that even casual empiricism reveals a sharp discrepancy between the predictions of existing theory and the actual behavior of bidders. In this paper, I show that the presence of multiple, contemporaneous auctions for similar items coupled with uncertainty regarding rival entry can explain both features. I analyze these features in a continuous-time stochastic auction model with endogenous entry, in which bidder types are differentiated by their initial information regarding the entry process. Empirical estimates using eBay auctions of pop-music CDs confirm my theoretical prediction that the rate of entry depends on price. I then test my model against alternative explanations of observed bidding behavior using a detailed field experiment.</p><p> The second essay is on empirical analysis of executive compensation in the continuous-time environment. In this essay, I develop a methodology for the identification and non-parametric estimation of a continuous-time principal-agent model. My framework extends the existing literature on optimal dynamic contracts by allowing for the presence of unobserved state variables. To accommodate such heterogeneity, I develop an estimation method based on numerically solving for the optimal non-linear manager's response to the restrictions of the contract. To demonstrate this feature, I apply my methodology to executive contracts from the retail apparel industry.</p><p>The third essay provides a tractable methodology for the construction and structural estimation of continuous time dynamic models. The specific class of models covered by my framework includes competitive dynamic games where there are no direct spillovers between objective functions of players. I develop an estimation methodology based on the properties of the equilibrium of the model. The methodology that I design can be applied to welfare and revenue analysis of large dynamic models. As an example, I compute the revenue and welfare gains for a counter-factual exercise in which the eBay auction website changes the format of its auctions from second-price to a flexible ending.</p> / Dissertation

<p>This dissertation consists of three essays that study preventive health behaviors among the elderly U.S. population.</p><p>The first essay studies the effect of Medicare coverage on demand for the influenza vaccine. I use a propensity score matching estimator to look at the effect of the 1993 Medicare part B coverage of the flu shot on demand. Using data from the Medicare Current Beneficiary survey, I find that the coverage increases demand by 12.4%. I also find that this effect varies by smoking status and by the presence chronic respiratory illnesses such as COPD, Asthma or Emphysema.</p><p>The second essay examines the effect of disease specific health shocks on risk perceptions and demand for the pneumonia vaccine. I find strong evidence of learning - individuals who experience a health shock are less likely to believe that they are not at risk of infection, conditional on prior beliefs. This change in beliefs is accompanied by a corresponding change in demand. Individuals who contract pneumonia or influenza are 60% more likely to vaccinate by the end of next year as compared to those who are not infected.</p><p>The third essay studies the relationship between education and health for a sample of elderly diabetics. We identify various mechanisms through which more education leads to improved health. We find that part of the strong positive correlation between educational attainment and health can be explained through differences in cognitive status, self-control and parental characteristics. However, some part of this relationship still remains unexplained.</p> / Dissertation

<p>This dissertation consists of three essays on macroeconomics in the frequency domain. In the first essay, I show that whereas the High-Frequency volatility of the majority of the macroeconomic series declined after the early 1980s, their Medium-Frequency volatility did not. Moreover, the Medium-Frequencies capture a large fraction of the volatility of these variables. In order to formally test whether a set of time-series is characterized by a break in their variance at any frequency, I construct a frequency domain structural break test. After deriving its asymptotic and small sample properties, I apply the test to the main U.S. real macroeconomic variables and conclude that the Great Moderation is just a High-Frequency phenomenon.</p> <p>In the second essay I compute the welfare cost of the Great Moderation, using a consumption based asset pricing model. The Great Moderation is modeled according to the data properties of the stationary component of consumption, which displays a reduction of the volatility at high frequencies, and an unchanged volatility at medium frequencies. The theoretical model, calibrated to match the average asset pricing variables in the data, relies on the evolution of the habit stock, which depends on the lower frequencies of consumption. These two features generate a modest welfare gain of the Great Moderation (0.6 percent). I show that this result depends mainly on the medium frequency properties of consumption.</p> <p>The third essay, which is joint work with Marija Vukotic, evaluates the effects of a change in monetary policy on the decline of the volatility of real macroeconomic variables, and on its redistribution from high to medium frequencies during the post-1983 period. By using a dynamic stochastic general equilibrium (DSGE hereafter) model, we find that the</p> <p>monetary policy alone cannot account for the observed changes in the</p> <p>spectral density of output, investment, and consumption. However, when we also consider a change in the exogenous processes, a different monetary policy accounts for 40 percent of the decline in the high-frequency volatilities and partially accounts for the redistribution of the variance toward lower frequencies.</p> / Dissertation

<p>This dissertation is motivated by the fact that while the literature has had a great deal of success in developing empirical models for monetary policy analysis, the same can not be said for fiscal policy. This work advances our understanding of various issues in identification and modeling of fiscal policy shocks. In particular, the first two chapters work towards building a compelling empirical model for fiscal policy evaluation and the last chapter addresses the importance of fiscal shocks, along with monetary shocks in explaining aggregate macroeconomic fluctuations.</p> <p>Chapter 1 identifies and explains the effects of a government spending shock. In response to a structural unanticipated government spending shock, output, hours, consumption and wages all rise, whereas investment falls on impact. An estimated dynamic general equilibrium model featuring deep habit formation successfully explains these effects. In particular, deep habits give rise to countercyclical markups and thus act as transmission mechanism for the effects of government spending shocks on private consumption and wages. In addition, I show that deep habits significantly improve the fit of the model compared to a model with habit formation at the level of aggregate goods.</p> <p>While Chapter 1 considers public spending financed by lump-sum taxes, Chapter 2 further extends the framework to allow for distortionary taxes, and a more careful modeling of the government financing behavior. I use full information Bayesian techniques to estimate this dynamic stochastic equilibrium model, and characterize the dynamics of the economy in the case of both spending and tax changes. I estimate fiscal multipliers and find the multiplier for government spending to be 1.12, and the maximum impact is when the spending shock hits the economy. In addition, the model predicts a positive but small response of private consumption to increased government spending. The multipliers for labor and capital tax on impact are 0.13 and 0.33, respectively. The effects of tax cuts, on the other hand, take time to build, and exceed the stimulative effects of higher spending at horizons of 12-20 quarters. The expansionary effects of tax cuts are primarily driven by the response of investment. I also carry out several counterfactual exercises to show how alternative financing methods and expected monetary policy have consequences for the size of fiscal multipliers. In addition, I simulate the effects of the American Recovery and Reinvestment Act of 2009 in the context of this empirical model.</p> <p>The final chapter, which is joint work with Barbara Rossi, analyzes the role of government spending shocks along with monetary policy shocks in explaining macroeconomic fluctuations, in a structural vector autoregression (VAR) where both shocks are identified simultaneously. Our main finding is that government spending shocks are relatively more important in explaining medium cycle fluctuations (defined between 32 and 200 quarters) and monetary shocks play a larger role in explaining business cycle frequencies (between 8 and 32 quarters). We also find that failing to recognize that both monetary and fiscal policy simultaneously affect macroeconomic variables might incorrectly attribute fluctuations to the wrong source.</p> / Dissertation

<p>This dissertation consists of three essays in empirical macroeconomics. In the first essay, I explore the dynamic effects of aggregate news about</p> <p>future technology improvements on sectoral fundamentals. I document that the durable goods sector responds significantly more to news shocks than the nondurable goods sector. By looking at the behavior of inventories, which have been largely neglected in the news literature, I show that aggregate news propagates the business cycle mainly through the durable goods sector. My theoretical framework is a two-sector, two-factor, real business cycle model augmented with the following three real rigidities: habit persistence in consumption, variable capacity utilization, and investment adjustment costs in both sectors. In addition, I introduce inventories as a factor in the production of durable goods. The model is successful in replicating the empirical responses of the US economy to news shocks. It reproduces the stronger response of the durable goods sector and can perfectly match the responses of inventories.</p> <p>The second essay, which is joint work with Roberto Pancrazi, evaluates the effects of a change in monetary policy on the decline of the volatility of real macroeconomic variables, and on its redistribution from high to medium frequencies during the post-1983 period. By using a dynamic stochastic general equilibrium model, we find that the monetary policy alone cannot account for the observed changes in the spectral density of output, investment, and consumption. However, when we also consider a change in the exogenous processes, a different monetary policy accounts for $40$ percent of the decline in the high-frequency volatilities and partially accounts for the redistribution of the variance toward lower frequencies.</p> <p>In the third essay, I study exchange rate dynamics. In particular, I investigate the main features of a rich theoretical model that are necessary to explain exchange rate volatility and persistence. As a theoretical framework, I use a small open economy dynamic stochastic general equilibrium (DSGE hereafter) model. The model is estimated using Bayesian techniques. I use post Bretton-Woods data for the following three countries: Australia, Canada, and the United Kingdom (UK hereafter). The performance of the benchmark model in replicating both real exchange rate persistence and volatility is rather good. I show that the domestic and importing sector price stickiness and indexation parameters are the most important features of the model for a successful replication of the real exchange rate dynamics. The importance of the importing sector price stickiness and indexation parameters is increasing in the share of importing goods in the consumption basket. The most important shocks for explaining the exchange rate volatility at business cycle frequency are the investment specific technology shock, monetary policy shock, and labor supply shock, among domestic economy shocks, and the shock to the interest rate among the foreign shocks.</p> / Dissertation

<p>In the first chapter of my dissertation I analyze the effect of migration and remittances on a small, open, migrant-sending country in the context of an endogenous growth model with technology transfers. I demonstrate that, due to a dynamic feedback effect from economic conditions to migration and from migration to economic development in an economy exposed to migration, initial conditions can determine its long-run steady state, leading to the rise of vicious or virtuous circles of development. Countries with a low level of technological development may end up in a poverty trap, in which a low level of development results in low wage rates and consequently high migration rates. The high migration and loss of manpower in a general equilibrium setting generates less demand for the adoption of leading technologies, reducing incentives to invest into new technologies. This reduced incentive effect in turn leads to low output and low wages and even higher migration in future periods. Potentially, as in the case of depopulated countries and regions the economy diverges from the world's growth rate and eventually ends up being emptied out. In addition, I show, that altruistic remittances as an important by-product of migration allow people to share the benefits of technological advances developed elsewhere and dampen the negative impact of migration. In particular, remittances remove the limiting case of emptying out of the economy and reduce the chances of ending up in a poverty trap. </p> <p> In the second chapter of my dissertation, I study the implications of migration and remittances for an economy with financial frictions. I introduce migration and remittances into Schumpeterian endogenous growth model with financial constraints and derive the conditions under which migration and remittances can have positive or negative impacts on the country's growth and convergence. I show that the results depend on the degree of the country's financial development and its distance to the technological frontier. Importantly, I show that if the financial constraint is strong, so that the economy is diverging from the world's growth path, then migration and remittances can have growth effects and can increase the steady state growth rate of the country as well as the likelihood that the country will converge to the world's growth path.</p> <p>My third chapter uses a new household-level panel dataset from Kyrgyzstan to study the determinants and implications of remittances and inter-household transfers in general in Kyrgyzstan. We find that remittances in Kyrgyzstan are positively correlated with the income of the receiving households and that the remittance-receiving households have a higher probability of purchasing durable goods then households not receiving remittances.</p> / Dissertation