Thesis (Ph. D.)--University of Missouri-Columbia, 2001. / Typescript. Vita. Includes bibliographical references (leaves 107-109). Also available on the Internet.

Thesis (Ph. D.)--University of Missouri-Columbia, 2001. / Typescript. Vita. Includes bibliographical references (leaves 107-109). Also available on the Internet.

This dissertation explores the effect of tax news on national and state-level economic activity. In the first chapter, I explore the effect of tax news on state economic activity. I estimate a factor-augmented vector autoregression (FAVAR) model, which allows us to consider the possibility that unobserved regional factors --such as credit and fiscal conditions-- might be relevant for modelling the dynamic response of aggregate and state-level economic activity. Tax news is identified as a shock to the implicit tax rate, measured by the yield spread between the one year tax-exempt municipal bond and the one-year taxable Treasury bond. My results suggest that an increase in the implicit tax rate raises national output over much of the anticipation period. In addition, anticipated tax increases give rise to expansions in state personal income and employment. I find that the variation in the responsiveness of economic activity across states is mostly explained by differences in industrial composition as well as by some demographic characteristics such as education attainment and median age. In the second chapter, I examine the impact and transmission of the effect of tax news on U.S. economic activity. I find that news related to higher federal income taxes raise the real GDP over the anticipation period. In addition, aggregate and disaggregate industrial production, employment per worker, hours worked per worker and capacity utilization rate respond positively to tax news in the short run. An historical decomposition shows that tax news and federal funds rate shocks have been the main source of fluctuations in real GDP. In particular, tax news associated with legislation in 1986, 1993, and 2001 contributed to the movements in the real GDP. In the third chapter, I investigate whether the effect of tax news shocks differs across periods of recession and expansion. I follow Jorda’s (2005) local projection method to estimate tax news effects on the economy. I find that news about future tax cuts reduces economic activity for about four quarters and has a significant effect on the U.S. economy in the short run. The behavior of output following tax news shocks is similar in both recession and expansion phases of the business cycle and indicates that news about future tax cuts are contractionary. However, the rebound in economic activity four quarters after the news shock is higher in the recessionary phase than in the expansionary phase. Finally, the state dependent model shows that news shocks have a stronger positive impact on consumption expenditures and residential investment in the recession phase than in the expansion phase.

This dissertation studies households' housing decision in the presence of income risks, and its implication on within-cohort income/consumption inequality and the nature of income risks facing households. It is composed of three chapters. The first chapter presents evidence from Panel Study of Income Dynamics (PSID) and Consumer Expenditure Survey (PSID) that housing consumption and housing investment are negatively affected by income risks. Within a household portfolio choice model, the negative effect can be attributed to the illiquidity of housing investment and the positive correlation between house price and income. The second chapter provides empirical evidence that the secular rise of income and consumption inequalities in the United States is age-dependent. It is more significant among younger households. With this feature, biasedness arises from the traditional methodology of decomposing inequality into age effect, year effect and cohort effect. A simple but effective remedy for the problem is proposed. The third chapter of the dissertation studies the age-profile of within-cohort income/consumption inequality, using the methodology proposed in the second chapter. It documents the age-profile of housing consumption inequality which is almost flat. This stands in contrast to the well-documented fact that within-cohort nonhousing consumption inequality rises with age, which has been argued to be evidence for persistent, uninsurable income shocks to households. This argument is challenged by the finding that housing consumption inequality has a flat age-profile. Within the framework of standard lifecycle model, the coexistence of rising nonhousing consumption inequality and flat housing consumption inequality constitutes a puzzle. A potential resolution lies in the negative effect of income uncertainty on housing decision which diminishes with age, as shown in the first chapter of the dissertation. / text

This dissertation studies the impact of several different housing market features on the macroeconomy. Chapter 1 augments the New-Keynesian model with collateral constraints to incorporate long-term debt in order to examine the interaction between multi-period loans, leverage, and indeterminacy. Allowing firms to borrow heavily against commercial housing by increasing the loan-to-value ratio from 0.01 to 0.90 reduces the level of steady state output approximately 3.19% and decreases social welfare. In contrast, increasing the debt limit of households increases steady state output by 2.72%. Social welfare is maximized under a utilitiarian function when households can borrow at a loan-to-value ratio of about 0.49. An economy with long-term debt also makes stabilization much more difficult for monetary policymakers because determinacy is harder to attain. Instead of only having to satisfy the Taylor Principle (which implies that a more than one-to-one response to inflation), central bankers must either use a strict inflation target or aggressively respond to inflation and the output gap to ensure determinacy. Chapter 2 examine a New-Keynesian model with housing where default occurs if housing prices are sufficiently low, resulting in a loss of access to credit and housing markets. Default decreases aggregate and patient household consumption, increases impatient household consumption, and amplifies the decline in housing prices due to a misallocation of housing. The effects on consumption often peak immediately before default occurs. Policies that prevent underwater borrowing or raise interest rates along with housing prices are generally desirable because they increase utilitarian social welfare. This paper shows that default is not simply a symptom of economic downturns, but a cause. Chapter 3 explores the correlation between the home mortgage interest deduction (HMID) and state economic growth. The HMID was introduced to incentivize home purchases by distorting the after-tax price, resulting in an overinvestment in real estate. Previous empirical work has shown that investment in physical capital increases economic growth more so than investment in structures. Theoretically, the anticipated effect of the HMID would be lower subsequent economic growth. However, this paper finds that residential housing is actually beneficial for economic growth.

This paper looks at the determinants of bond yields for a select group of Eurozone countries, during the European sovereign debt crisis. In addition to traditional determinants of spreads, which include credit risk, liquidity risk and international risk aversion, this paper looks at the role of credit rating agencies. The movements of countries’ yields during the debt crisis played an integral role in the resulting bailouts by the European Union. Using expected data published by the European Commission, the results of the model were in line with current literature, with the exception of the effect of budget deficits. One interpretation of the conflicting results is that during a debt crisis what market participants care about is growth, not austerity. Including the effect of credit ratings showed that credit ratings have high predictive power.

Ecological Economics has not paid sufficient attention to the macroeconomic level both in terms of theory and modeling. Yet, key topics debated in the field of Ecological Economics such as sustainable consumption, reduction in working time, the degrowth debate, the energy-exergy link, and the rebound effect require a holistic and macro perspective. While this deficiency has been identified before and Keynesian economics has been generally suggested as a potent vehicle to establish economic system's thinking, very little concrete theorizing and practical suggestions have been put forward. We give further credence to this suggestion and demonstrate the value of tackling key concerns of Ecological Economics within a Keynesian growth framework. Contextualized by an application to climate change we suggest that policy relevant recommendations need to be based on a consistent view of the macroeconomy. We end with laying out key building blocks for a Keynesian model framework for an Ecological Macroeconomics. (authors' abstract)

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Typescript. / Bibliography: leaves 307-335. / Photocopy. / Microfilm. / x, 335 leaves, bound ill. 29 cm

Thesis (Ph.D.)--University of Wollongong, 2004. / Typescript. Includes bibliographical references: leaf 300-317.