This dissertation consists of three essays on income risk and aggregate demand over the business cycle, each addressing an aspect of the Great Recession. The first chapter reframes the standard liquidity trap model to illustrate the costly feedback loop between idiosyncratic risk and aggregate demand. I first show that a liquidity trap can result from excess demand for precautionary savings in times of high uncertainty. Second, I show that the output and welfare costs of the ensuing recession depend crucially on how the drop in demand for output is translated into a reduction in demand for labor. Increased unemployment risk compounds the original rise in idiosyncratic productivity risk and reinforces precautionary motives, deepening the recession. Third, I show that increasing social insurance can raise output and welfare at the zero bound. I decompose these effects to distinguish the component unique to the liquidity trap environment and show that social insurance is most effective at the zero bound when it targets the type of idiosyncratic risk households face, which in turns depends on the labor market adjustment mechanism. The second paper offers a novel model of the connection between the consumer credit and home mortgage markets through an individual’s credit history. This paper introduces a novel justification for the home mortgage interest deduction. In an economy with both housing assets and consumer credit, the mortgage interest deduction is modeled as a subsidy for the accumulation of collateralizable assets by households who have maintained good credit. As such, the subsidy loosens participation constraints and facilitates risk-sharing. Empirical evidence and a calibration exercise reveal that the subsidy has a sizable impact on the availability of credit. The third paper assesses the role of policy uncertainty in the Great Recession. The Great Recession features substantial geographic variation in employment losses, a fact that is often presented as a challenge to uncertainty-based models of the downturn. In this paper we show that there is a substantial correlation between the distribution of employment losses and the increases in local measures of both economic and policy uncertainty. This relationship is robust across a wide range of measures. / Economics

This dissertation consists of three independent chapters, each of which use microeconomic data and methods to inform an analysis of macroeconomic models and questions. The first two chapters study the short-run dynamics of housing markets, while the last chapter studies fluctuations in labor markets. / Economics

Lietuvos ekonomikos raidos tendencijos neatskiriamos nuo pasaulio ekonomikos raidos tendencijų. 2004 metų gegužės 1 dieną Lietuvos istorijoje atsivėrė naujas puslapis – šalis tapo Europos Sąjungos nare. Po ilgų okupacijos metų, audringo pereinamojo į demokratinę visuomenę laikotarpio, prasidėjusio 1990 metų kovo 11-ąją atkūrus valstybingumą, Lietuva įsijungia į demokratinių Europos šalių bendruomenę. Lietuvos įstojimo į ES tikslas pagrįstas politiniais ir ekonominiais interesais. Dviejų didžiausių pasaulio ekonomikų – ES ir JAV – konkurencija ir bendradarbiavimas Lietuvos ekonomikai atveria ne tik galimybių. ES rinka šiandien yra ne tik viena didžiausių pasaulio rinkų pagal dydį, bet ir didžiausia pagal ekonominę galią ir augimo perspektyvas. 2004 metų gegužės mėnesį Europos Sąjunga (ES) iš penkiolikos šalių grupės (ES-15) tapo dvidešimt penkių šalių grupe (ES-25). Daugelis naujų ES šalių turi panašias vystymosi tendencijas. Pagrindinis naujų ES šalių tikslas yra sumažinti atotrūkį nuo ES- 15 pasiekto lygio pagal svarbiausius makroekonominius rodiklius. Magistro baigiamojo darbo tikslas bei keliami uždaviniai yra ištirti Lietuvos ekonomikos augimo teigiamus ir neigiamus pokyčius, atsiradusias galimybes ir problemas, ištirti Lietuvos ekonomiką Europos Sąjungos kontekste, jos integracinius procesus, išanalizuoti ekonomikos augimo perspektyvas. / Lithuanian economy development trends are inseparable from the trends of world economy development. On the 1st of May in 2004 there was a new page turned in the history of Lithuania – a country became a member of European Union. After long years of occupation and rough transition period, leading to democratic society, witch started on 11th of March in 1990 after the statehood reinstatement, Lithuania joins the society of democratic European countries. Joining the EU was based on political and economical interests. Competition and cooperation of the two biggest economics in the world – EU and USA – gives not only opportunities to Lithuania. Today the European Union market is not only one of the biggest markets in the world according to its size, but also the biggest market according to economical power and growth prospects. In May of 2004 European Union (EU) from the group of fifteen countries (EU-15) became a group of twenty five countries (EU-25). Most of new EU countries have similar development trends. The main purpose of new EU members is to bridge the gap between EU-15 levels according to the main macroeconomic rates. The object and goals of a magistracy work are to examine positive and negative changes of Lithuanian economic growth, opportunities and problems that arise, also to examine Lithuanian economy in the context of European Union, the integration processes, to analyze the prospects of economical growth. In this work these methods are used: analysis and... [to full text]

The extent of influence of monetary policies on housing prices in the Greater China region is examined in this study using data from 2005-2015. Using vector autoregression, the effects of housing indices, interest rates, money supply as well as stock market index are accessed. Results suggest that monetary policies do in fact influence housing market trends in Greater China. Furthermore, the extent of influence on Mainland China on the Hong Kong and Taiwan markets is also tested. Results imply a greater co-integration between the Mainland and Hong Kong market than that between Mainland and Taiwan. The effect of exchange rate is deemed as insignificant. Housing policies set by national and local governments show to be less influential than predicted. Lastly, granger causality is not present between the different markets within this study.

This dissertation focuses on the relationship between the education-based fertility gap and economic growth and on policy as a determinant of fertility. In the first essay I evaluate the impact of differential fertility (the difference between fertility rates of women with high educational attainment and women with low educational attainment) on economic growth by accounting for critical marginal effects and the general level of educational attainment in a given country. I also examine the possibility that this effect varies based on level of inequality and income levels. I find that for a less developed country with high income inequality, higher fertility rates of women with lower education has a favorable impact on economic development. In the second essay I examine the transmission and magnitude of the effect of differential fertility on economic growth at the subnational level. I explore the relationship between differential fertility and economic growth in a cross-U.S. state context. I find that a larger gap in fertility rates between highly-educated and less-educated women is strongly associated with a decrease in the rate of long-run economic growth across U.S. states, even after accounting for the levels of inequality and overall fertility. In the third essay I explore policy as a determinant of the education-based fertility gap. I use the 2007 Massachusetts healthcare reform which provides a good setting for evaluating the effect of an exogenous policy on the fertility. I find that fertility increases among young married women and decreases among young unmarried women but that there is no asymmetrical fertility response based on the education level of the mother.

Since the start of the financial crisis in 2008, the Federal Reserve has been engaging in quantitative easing. Quantitative easing is a form of open market operation in which the Federal Reserve buys long-term U.S. government and other securities, versus traditional open market operations that occur through the short-term Treasury bill market. At the same time, the shadow bank system, which is a system of financial intermediaries that perform unregulated credit intermediation outside of traditional banks, has contracted significantly. Some argue that this contraction is due to a collateral crunch induced by quantitative easing in the shadow bank system—a crunch that occurred when the Federal Reserve’s quantitative easing program took high-quality collateral off the market. I will focus specifically on repurchase agreements, an instrument within the shadow banking that uses the same types of securities that the Federal Reserve has been buying during quantitative easing as collateral, to determine whether quantitative easing has led to a contraction of the repurchase agreement market. I find that increases in Federal Reserve asset holdings from 2005-2013, and specifically during QE1, are associated with decreases in primary dealer repurchase agreements. This shows that under certain circumstances, Federal Reserve asset purchases lead to contractions in the shadow bank system. This paper aims to increase understanding of how monetary policy affects shadow banking and understanding of the unintended consequences of monetary policy, such as decreased shadow bank lending caused by quantitative easing.

This paper uses data collected from the National Interbank Funding Center of China, the People’s Bank of China, the National Bureau of Statistics, and Bloomberg starting in October 2006 through 2013 to test the economic fundamental’s affecting the housing market in Shanghai, particularly interest rates. This study finds that the 6- month duration Shibor has a negative and significant correlation with house price growth in Shanghai when lagged 4 months. The analysis continues by examining other economic fundamentals affecting house price growth, finding growth in inflation, the money supply and Shanghai real estate investment to have significant, positive relationships with the housing market in China. GDP and the national state balance, on the other hand, have negative and significant relationships with house price growth. The Shanghai stock exchange was found to have no significant impact on the housing market over the time period. The sample period is limited to 87 observations due to the relatively recent development of Shibor for a benchmark interest rate.

The main aim of this paper is to measure the underground economy of India and to review previous attempts to do the same. In this paper I provide estimates of the size of the hidden economy of India for the period 1971 - 2004. Analysis on previous attempts is done with a focus on the dynamic multiple indicators multiple causes (DYMIMC) and the currency demand methods. I estimate the size of the Indian economy using indicator and causal variables chosen by Schneider, Chaudhuri and Chatterjee in their paper, “The Size and Development of the Indian Shadow Economy and a Comparison with other 18 Asian Countries: An Empirical Investigation”.

The premise of this paper is that in a monetary production economy, policy decisions of the central bank, or more generally the 'monetary authority', set the tone not only for nominal interest rates but also for 'real' interest rates defined in the usual way. This is a different question than that of which institution(s) acquire the status of monetary authority at any particular stage of socioeconomic or technological development. Rather the suggestion is that the existence of some such social structure is a prerequisite if anything resembling capitalist monetary production is to be viable. The paper demonstrates that a coherent macroeconomic theory can be elaborated on this basis, including an explanation of economic growth, the business cycle, inflation, the functional distribution of income, the 'Keynesian' problem of the impact of demand growth on economic growth, endogenous money, cumulative causation, and endogenous technical change. (author's abstract) / Series: Working Papers Series "Growth and Employment in Europe: Sustainability and Competitiveness"

The present thesis is a collection of three separate essays, each corresponding to a chapter.Each essay represents an application of structural dynamic analysis within TVC-VARmodels. In the first chapter, coauthored with Fabio Canova, we investigate the relationshipbetween changes in output and inflation and monetary policy in the US. There are variationsin the structural coefficients and in the variance of the structural shocks but only the latterare synchronized across equations. The policy rules in the 1970s and 1990s are similar asis the transmission of policy disturbances. Changes in inflation persistence are only partlyexplained by monetary policy changes. Variations in the systematic component of policyhave limited effects on the dynamics of the system. Results are robust to alterations in theauxiliary assumptions.In the second chapter, coauthored with Fabio Canova and Evi Pappa, we examine thedynamics of US output and inflation. We show that there are changes in the volatility ofboth variables and in the persistence of inflation. Technology shocks explain changes inoutput volatility, while a combination of technology, demand and monetary shocks explainvariations in the persistence and volatility of inflation. We detect changes over time in thetransmission of technology shocks and in the variance of technology and of monetary policyshocks.In the third chapter we study whether hours worked rise or fall after a positive technologyshock. According to the existing evidence it depends on whether they enter the VAR in levels(hours rise) or growth rates (hours fall). We argue that conflicting results may ultimatelyarise because important structural time variations in the US economy are a priori ruledout by empirical models. We identify technology shocks as the only shocks driving long-runlabor productivity using postwar US quarterly data. We find that, under both specificationsfor hours (levels and growth rates), (i) hours fall, and (ii) technology shocks explain about11-23% of total aggregate fluctuations giving rise to positive but small correlations betweenoutput and hours. Differences with respect to fixed coefficients VAR are due to instabilitiesin the relationship between labor productivity and levels of hours.To conclude, the main contribution of the present research work as a whole is twofold.First, from an empirical perspective, we provide new evidence on some important macroeconomicissues of the US economy. In all the applications new interesting results, absentin standard VAR, emerge. Second, from a theoretical perspective, we contribute to developnew tools useful for policy analysis within the class of TVC-VAR models.