This dissertation consists on three essays, inquiring about the usefulness of disaggregated data and cross-sectional causal effects to improve our understanding of traditional questions in macroeconomics, both for economic fluctuations and long-run outcomes. In Chapter 1, I explore whether the large body of cross-sectional evidence that established the adverse effects of cuts in the supply of bank lending on firm outcomes and the allocation of credit is relevant at the aggregate level. I estimate this aggregate effect using a new general equilibrium model that incorporates multibank firms, relationship banking, endogenous credit dependence, and bank market power. I use a set of cross-sectional patterns to estimate the key structural parameters of the model. The effect of an aggregate lending cut on aggregate output is large: a 1 percent decline in aggregate bank lending supply reduces aggregate output by 0.2 percent. The structure of labor and credit markets is important in reaching this answer. Under an alternative parametrization of the model that ignores input market frictions, the response of aggregate output is three times smaller. Under my preferred parametrization, the cross-sectional effects survive aggregation in general equilibrium. Instead, with frictionless input markets the cross-sectional patterns over-estimate the aggregate response by a factor of five. In Chapter 2, written with Sergio Ocampo, we study how the efficacy of development policies---such as job-guarantee programs, unemployment insurance, and micro-finance---depends on the prevalence of low-earning self-employed individuals. To this end, we develop a new general equilibrium occupational choice model that is consistent with the behavior and composition of self-employment. Our model differs from previous work by allowing unemployment risk to shape the selection of agents into self-employment. Models that rely only on financial frictions are at odds with crucial features of self-employment in developing economies---in particular, the concentration of self-employed agents among the lowest earners in the economy, and their willingness to accept salaried jobs when offered to them. These features support the prevalence of subsistence entrepreneurs in developing economies, who play a critical role in shaping policy responses. Their willingness to accept jobs at market wages leads to a muted response of wages to labor demand shocks, such as the implementation of a job-guarantee program. In addition, offering small unemployment benefits reduces subsistence entrepreneurship, thereby increasing productivity and output. In contrast, micro-finance exacerbates subsistence entrepreneurship, thereby reducing productivity. Finally, in chapter 3, with Andres Drenik and Pablo Ottonello, we study the importance of information frictions in asset markets at the aggregate level. We develop a methodology to identify the extent of information frictions based on a broad class of models of trade in asset markets, which predict that these frictions affect the relationship between listed prices and selling probabilities. We apply our methodology to physical capital markets data, using a unique dataset on a panel of nonresidential structures listed for trade. We show that the patterns of prices and duration are consistent with the presence of asymmetric information. On the one hand, capital units that are more expensive because of their observable characteristics tend to have lower duration, as predicted by models of trading under a full information model. On the other hand, capital units that are expensive beyond their observable characteristics tend to have a longer duration, as predicted by models of trading under asymmetric information. Combining model and data, we estimate that asymmetric information can explain 21% of the +30% dispersion in price differences of units with similar observed characteristics. We quantify the effects of information frictions on allocations, prices, and liquidity, and show that the estimated degree of information frictions can to lead to 15% lower output due to low trading probabilities of high-quality capital.

published_or_final_version / Economics and Finance / Master / Master of Economics

published_or_final_version / Economics / Master / Master of Social Sciences

This study considers the problem of the consumer in light of work presented by classical economists who discussed consumption. Richer assumptions about the tasks of an individual consumer and technology of consumption activities are used to develop a static model of consumer behavior. This model is extended through the introduction of opponent-process theory to develop a dynamic model which includes habit formation. Particular emphasis is placed in Chapter 2 upon the psychological underpinnings of consumption activities and the allocation of time aspect of these activities. It is assumed that a consumption activity is defined as a production function combining commodity and time inputs to produce satisfaction. Chapter 3 presents the framework over which preferences about different activities are defined. Preference relationships are assumed to be rational, transitive, and constant over time and location. In addition, satiation in a particular consumption activity is assumed to exist and the ranking over satiation states is defined. Chapter 4 deals with the behavior of a time and income constrained consumer who seeks to choose an optimal bundle of commodity and time inputs over the ordered activity set. The solution to this problem is characterized by affordable allocation of resources from the highest ranked down to the lowest ranked activity. Comparative statics results associated with this solution are considered for non-labor income, wage rate, and price changes. It is shown that besides the production substitution effects brought about by changes in the wage rate and in commodity prices, the net effect of changes in economic variables is predominantly at the lower end of the preference ordering. Chapter 5 presents both a psychological version of opponent-process theory and an economic interpretation of this theory which is used to describe habit dynamics. Chapter 6 combines the static consumer problem and the dynamic description of activity productions under habit formation to present an extended problem of a dynamic consumer behavior.

Suen Ming-hon. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2001. / Includes bibliographical references (leaves 46-49). / Abstracts in English and Chinese. / Abstract --- p.i / Acknowledgement --- p.iii / Table of Contents --- p.iv / Introduction --- p.1 / Chapter Chapter 1 --- The Benchmark Model --- p.9 / Chapter 1.1 --- The Model --- p.9 / Chapter 1.2 --- Comparative Statics --- p.12 / Chapter 1.3 --- Local Stability --- p.13 / Chapter Chapter 2 --- Long-Run Relationships Between Money and Growth --- p.14 / Chapter 2.1 --- The Money-in-the-Utility-Function (MIUF) Model --- p.15 / Chapter 2.2 --- The Cash-in-Advance (CIA) Model --- p.19 / Chapter 2.2.1 --- The Clower-Lucas Model --- p.20 / Chapter 2.2.2 --- The Stockman Model --- p.22 / Chapter 2.3 --- The Pecuniary Transactions Costs (PTC) Model --- p.26 / Chapter Chapter 3 --- Transitional Dynamics --- p.31 / Chapter 3.1 --- The Money-in-the-Utility-Function (MIUF) Model --- p.31 / Chapter 3.2 --- The Cash-in-Advance (CIA) Model --- p.32 / Chapter 3.2.1 --- The Clower-Lucas Model --- p.32 / Chapter 3.2.2 --- The Stockman Model --- p.33 / Chapter 3.3 --- The Pecuniary Transactions Costs (PTC) Model --- p.34 / Chapter Chapter 4 --- Conclusion --- p.37 / Mathematical Appendix / Chapter A.1 --- The Benchmark Model --- p.39 / Chapter A.2 --- The Money-in-the-Utility-Function (MIUF) Model --- p.39 / Chapter A.3 --- The Cash-in-Advance (CIA) Model --- p.40 / Chapter A.3.1 --- The Clower-Lucas Model --- p.40 / Chapter A.3.2 --- The Stockman Model --- p.41 / Chapter A.4 --- The Pecuniary Transactions Costs (PTC) Model --- p.43 / Table 1 Summary of Findings --- p.45 / Reference --- p.45

Lee Sui Fung. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1999. / Includes bibliographical references (leaves 59-62). / Abstract also in Chinese. / Declaration --- p.i / Acknowledgement --- p.ii / Table of Contents --- p.iii / List of Illustrations --- p.v / Notation --- p.vi / Chapter Chapter 1 --- Introduction / Chapter 1.1. --- Chapter Preview --- p.1 / Chapter 1.2. --- Literature Review --- p.1 / Chapter 1.2.1. --- The Development of Research on Endogenous Growth Model --- p.1 / Chapter 1.2.2. --- The Development of Research on Dependent-Economy Model --- p.3 / Chapter 1.2.3. --- The Development of Research on Capital Accumulation and Economic Growth --- p.4 / Chapter 1.3. --- Thesis Objectives --- p.6 / Chapter 1.4. --- Organization of the Thesis --- p.7 / Chapter 1.5. --- Chapter Summary --- p.8 / Chapter Chapter 2 --- The Endogenous Growth Model / Chapter 2.1. --- Chapter Preview --- p.10 / Chapter 2.2. --- Theoretical Framework --- p.10 / Chapter 2.3. --- Determination of Macroeconomic Equilibrium --- p.16 / Chapter 2.3.1. --- Static Allocation Conditions --- p.17 / Chapter 2.3.2. --- Macrodynamic Equilibrium --- p.18 / Chapter 2.4. --- Chapter Summary --- p.21 / Chapter Chapter 3 --- The Steady-State Equilibrium / Chapter 3.1. --- Chapter Preview --- p.24 / Chapter 3.2. --- Conditions for Steady-State Equilibrium --- p.24 / Chapter 3.2.1. --- Existence and Uniqueness of Balanced Growth Equilibrium --- p.25 / Chapter 3.3. --- Long-Run Adjustment --- p.26 / Chapter 3.4. --- Application of the Model --- p.31 / Chapter 3.4.1. --- Increase in the Costs of Borrowing --- p.31 / Chapter 3.4.2. --- Increase in the Rate of Time Preference --- p.32 / Chapter 3.4.3. --- Increase in Domestic Productivity --- p.33 / Chapter 3.5. --- Chapter Summary --- p.33 / Chapter Chapter 4 --- The Transitional Dynamics / Chapter 4.1. --- Chapter Preview --- p.35 / Chapter 4.2. --- Derivation of Transitional Adjustment Paths --- p.35 / Chapter 4.3. --- Characterisation of the Transitional Dynamics --- p.38 / Chapter 4.3.1. --- Increase in the Costs of Borrowing --- p.41 / Chapter 4.3.2. --- Increase in the Rate of Time Preference --- p.43 / Chapter 4.4. --- Chapter Summary --- p.45 / Chapter Chapter 5 --- Conclusions --- p.46 / Appendix1 --- p.52 / Appendix2 --- p.58 / References --- p.59

Chen, Meichen. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2013. / Includes bibliographical references (leaves 34-37). / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Abstracts also in Chinese.

Thesis. 1975. Ph.D.--Massachusetts Institute of Technology. Dept. of Economics. / Vita. / Bibliography: leaves 213-214. / Ph.D.

This thesis consists of two parts. In the first part, we concentrate on the computation of Market Equilibria and settle the long-standing open problem regarding the computation of an approximate Arrow-Debreu market equilibrium in markets with CES utilities. We prove that the problem is PPAD-complete when the Constant Elasticity of Substitution parameter $\rho$ is any constant less than -1. Building on this result, we introduce the notion of non-monotone utilities, which covers a wide variety of utility functions in economic theory, and prove that it is PPAD-hard to compute an approximate Arrow-Debreu market equilibrium in markets with linear and non-monotone utilities. In the second part, we study Revenue Maximization. We begin by resolving the complexity of the revenue-optimal Bayesian Unit-demand Item Pricing problem when the buyer's values for the items are independent. We show that the problem can be solved in polynomial time for distributions of support size 2; but its decision version is NP-complete for distributions of support size 3. Next, we study the optimal mechanism design problem for a single unit-demand buyer with item values drawn from independent distributions. We show that, for distributions of support-size 2 and the same high value, Item Pricing can achieve the same revenue as any menu of lotteries. On the other hand, we provide simple examples where randomization improves revenue. Finally, we show that unless the polynomial-time hierarchy collapses, namely P^{NP}=P^{#P}, there is no universal efficient randomized algorithm that implements an optimal mechanism even when distributions have support size 3.

This dissertation combines micro-level empirical analyses and general equilibrium models to study the issues of output price, price-cost markup, and business cycle dynamics. In the first chapter, I study how a credit crunch affects output price dynamics. I build a unique micro-level dataset that combines scanner-level prices and quantities with producer information, including the producer's banking relationships, inventory, and cash holdings. I exploit the Lehman Brothers' failure as a quasi-experiment and find that firms facing a negative credit supply shock decrease their output prices approximately 15% relative to their unaffected counterparts. I hypothesize that such firms reduce prices to liquidate inventory and to generate additional cash flow from the product market. I find strong empirical support for this hypothesis: (i) firms facing a negative bank shock temporarily decrease their prices and inventory and increase their market share and cash holdings relative to their counterparts, and (ii) this effect is stronger for firms and sectors with high initial inventory or small initial cash holdings. To discuss the aggregate implications of these findings, I integrate this micro-level study into a business cycle model by explicitly allowing for two identical groups of producers facing different degrees of credit supply shock. The model predicts that a negative credit supply shock leads to a large temporary drop in aggregate inflation---as a result of the aggressive liquidation of inventory---followed by an increase in inflation as producers eventually run out of inventory. This prediction for inflation and inventory dynamics is fully consistent with observations for the 2007-09 recession. In the second chapter, I study price-cost markup cyclicality. Existing empirical evidence on price-cost markup cyclicality is mixed. I find that markups are procyclical unconditionally, and procyclical conditional on demand shock using a flexible production function. The estimated production function features a larger input complementarity than that in a tightly parametrized production function (Cobb-Douglas and CES), producing both greater efficiency and higher markups during an expansion. These results have two striking implications: (i) much of the cyclicality in markups arises from input complementarity, rather than nominal rigidity, and (ii) the U.S. economy behaves as if it has increasing returns to scale. The third chapter studies the business cycle with a Translog production function. We empirically identify a complementarity between labor and energy that leads to procyclical returns to scale, which is not compatible with the tightly parameterized production function commonly used in the literature (Cobb-Douglas and CES). We, therefore, propose a flexible Translog production function that not only features complementarity-induced procyclical returns to scale but is also consistent with a balanced growth path. A simple calibrated business cycle model with the proposed production function generates strikingly data-consistent dynamics following demand shock without relying on either nominal rigidities or countercyclical markups. Our model also produces a stronger amplification effect than the model without complementarity. We then incorporate our production function into a benchmark medium-scale New Keynesian model (Smets and Wouters 2007) and repeat the business cycle accounting exercise. We find that input complementarity leads to a more dramatic decrease in the role of ''suspicious shocks" than of ''structural shocks."