While the long run productivity of federal highway infrastructure spending has been well researched, their short run effects and effects on income inequality. This dissertation explores those under-researched unconventional effects. In the first chapter, I investigate the effects of federal infrastructure grants on income inequality. I find that grants reduce inequality in both recipient and neighboring states. The reduction is driven by greater income among the bottom three income quintiles. I explore two mechanisms using person level data and find that the reduction in inequality is attributable to higher income for low-skilled workers and workers working in low-skilled industries. In the second chapter, I investigate the role of implementation lags in the ARRA. I find that the employment effects after six months were nearly twice as high in short lag counties compared to long lag counties. However, these effects quickly fade. I find no evidence of implementation lags impacting employment after one year. In the third chapter, I examine the effect of the business cycle on completion times of federally financed transportation infrastructure projects. I find that projects that begin construction during periods of economic slack are completed more quickly, suggesting an alternative mechanism for state dependent fiscal multipliers.

Destructive events such as natural disasters and terrorist attacks occur not only in developing economies but also developed economies. Consequently, the response of these economies has been observed in case of both type of events. This dissertation is a collection of essays regarding natural disasters, terrorist attacks and the macroeconomy. Specifically, I examine the response of local labor markets that reflect a wide spectrum of economies, but also have a safety-net in the form of being part of a developed country in the aftermath of a violent tornado. Further, I explore the heterogeneity in the economies response to natural disasters and terrorist attacks. Additionally, I investigate the effects of terrorism on growth and its disaggregated value added components. The first chapter focuses on the effects of tornadoes on local labor markets. I examine the change in local labor markets caused by extreme tornadoes that occur in counties of the contiguous United States. I also investigate the effect these tornadoes have on neighboring counties and evaluate the labor market response in urban and rural counties separately as well. Using a generalized difference-in-difference approach on quarterly data spanning from 1975 to 2016, I find that counties experience persistently higher wages per worker two years following a violent tornado. The effects on urban county can be observed on employment, while the effect in the rural county is observed on wages per worker. Further, evaluating the response of labor markets by sectors reveals the industrial sectors that experience increased labor market activity. The second chapter evaluates the long-run effects of natural disasters and terrorist attacks on growth and the channels through which they affect growth. Using the conceptual framework of a Solow-Swan model I examine an unbalanced annual panel of 125 countries spanning from 1970 to 2015 and find that domestic terrorist attacks, floods, and storms have a similar negative effect on growth, while transnational terrorist attacks and earthquakes have no significant effect on growth. Examining the channels through which they affect growth brings to the forefront the differences between these different types of events. I find that domestic terrorist attacks lead to increased military expenditures in their wake, while floods lead to increased non-military expenditures in their aftermath. Reviewing the data by developed and emerging economies reveals that developed economies are better able to absorb the shock of terrorist attacks as well as natural disasters. I find that although emerging economies are able to absorb the shock of transnational and domestic terrorist attacks, they experience some adverse effects from floods and storms. The third chapter examines the path of GDP growth and its disaggregated industrial, service, and agricultural sector value added components in the aftermath of two types of terrorism - transnational and domestic terrorism. Using a panel VAR model on cross country annual data from 1970 to 2015 I find that fatalities caused by neither domestic nor transnational terrorist attacks lead to a significant change in GDP growth. Examining the disaggregated industrial, service, and agricultural sector components of GDP growth reveals that even disaggregated the value added components of GDP growth experience no adverse effects from the deaths caused by transnational and domestic terrorist attacks. I also distinguish the emerging economies from the entire sample to find that GDP growth in emerging economies experience no significant effects due to the casualties of transnational and domestic terrorist attacks.

This dissertation explores the effects of factors such as industrial policy and listing on the stock market on manufacturing firms’ profitability and productivity. The second chapter investigates the effect of industrial policies on misallocation using a rich data-set of Chinese firms. Using a difference-in-difference approach, I provide evidence that government policies (i.e. the 10th Five Year Plan) favoring particular industries lead to increased misallocation (i.e., an increase in the dispersion of revenue productivity across firms in four-digit industries). Moreover, the differential changes between industries supported and not supported by the 10th Five Year Plan are quantitatively large and indicative of a substantial negative impact on aggregate TFP. Using a changes-in-changes model, I find evidence that the Five Year Plan had a positive and significant effect for most of the TFPR distribution while the effect was negative for the lowest quintile of TFPQ and positive for the highest TFPQ quintile. The results suggest increased misallocation is related to the way in which the Chinese government doled out support through the increase of subsidies and the improvement of credit conditions for a subset of firms. In the third chapter, I study the heterogeneous effects of an industrial policy -the 10th Five Year Plan on misallocation, profitability and real technology in Chinese provinces with different mix of supported intensities. I find that the 10th Five Year Plan increased misallocation, profitability and technology of supported industries in provinces with higher supporting intensities. After controlling the effects of China’s state-owned enterprise (SOE) reforms and joining into World Trade Organization (WTO), the results are still robust and consistent. In the fourth chapter, I investigate the effects of listing on the stock market on firm’s profitability and technology. Using Chinese firm level data, I identify listing firms, and compute revenue productivity and physical productivity to measure profitability and technology, respectively. To deal with the endogenous problem of listing, I use the number of investment banks as instrument variable. With a difference-in-difference model, I find that listing increases firm’s profitability and technology. Empirical findings also reveal that listing changes characteristics of firms, such as asset, liability and capital structure.

This dissertation includes three essays on growth, the housing market, and inequality. In the first essay, I analyze the effects of government consumption and government debt on long-run economic growth by considering the economic characteristics of the countries investigated. Linear regressions reveal that government consumption has a much bigger negative impact on long-run growth compared with the negative (and sometimes insignificant) effects of government debt. Nonlinear analyses further show that such effects are highly impacted by the economic characteristics of the countries investigated. In the second essay, I study time-series fluctuations in the United States housing market from 2010 to 2016 using the Gordon growth model. Using variance decomposition analysis, I find that the housing premium is the main driver of housing market fluctuations. Motivated by previous studies and using impulse response functions, I show how different components of the housing market respond over time to a shock in the interest rate in regions with different levels of income or demographics. My findings suggest that the impact of monetary policy is smaller (and less persistent) in the U.S. housing market when households have more females, more African Americans, or fewer well-educated members; a combination of these demographics and a lower income in households results in a smaller impact of monetary policy in the housing market, due to the necessity of housing for these families. In the third essay, I use Internal Revenue Service (IRS) annual data and Zillow median housing price data, to analyze the impact of income inequality on housing price to rent ratio from 2005 to 2015 for more than 12,700 zip codes. Employing various specifications, I find a consistent positive and significant relationship between the Gini coefficient and housing affordability index. My results are robust to different methods of estimating the Gini index. Moreover, the empirical results of this study suggest a larger impact of inequality in zip codes with higher levels of income.

This study analyses income inequality and poverty in the rural and urban sectors in Iran during the post Islamic revolution period, 1983-1993. It has been based on household level data relating to the Household Income and Expenditure Surveys conducted by the Statistical Centre of Iran for 1983, 1988 and 1993. The study starts with a brief review of the main features of the Iranian economy. This is followed by a brief discussion of the data. An analysis of temporal changes in income distribution and welfare, the contributions of factor income components on per capita income inequality, a detailed analysis of absolute poverty, earnings behaviour of full time urban male workers. The final chapter summarises and brings together the main conclusions. By and large, the finding of this study are quite rich and provide a very clean picture in the levels of income inequality, welfare and absolute poverty. Most of the changes in income inequality and poverty observed in this study seem to be, to some extent, the reflections, if not the outcomes, of government policies, strategies and war related activities and shortages etc. Based on the Iranian experience, we can say that political stability, accompanied by consistent and sustainable macroeconomic policies can ensure a reduction in income inequality and absolute poverty in a developing country. / Doctor of Philosophy (PhD)

This dissertation contains a series of essays that provide empirical evidence for Australia on some fundamental predictions of real business cycle models and on the convergence and persistence of real interest rates. Chapter 1 provides a brief introduction to the issues examined in each chapter and provides an overview of the methodologies that are used. Tests of various basic predictions of standard real business cycle models for Australia are presented in Chapters 2, 3 and 4. Chapter 2 considers the question of great ratios for Australia. These are ratios of macroeconomic variables that are predicted by standard models to be stationary in the steady state. Using time series econometric techniques (unit root tests and cointegration tests) Australia great ratios are examined. In Chapter 3 a more restrictive implication of real business cycle models than the existence of great ratios is considered. Following the methodology proposed by Canova, Finn and Pagan (1994) the equilibrium decision rules for some standard real business cycle are tested on Australian data. The final essay on this topic is presented in Chapter 4. In this chapter a large-country, small-country is used to try and understand the reason for the sharp rise in Australia??s share of world output that began around 1990. Chapter 5 discusses real interest rate linkages in the Pacific Basin region. Vector autoregressive models and bootstrap methods are adopted to study financial linkages between East Asian markets, Japan and US. Given the apparent non-stationarity of real interest rates a related issue is examined in Chapter 6, viz. the persistence of international real interest rates and estimation of their half-life. Half-life is selected as a means of measuring persistence of real rates. Bootstrap methods are employed to overcome small sample issues in the estimation and a non-standard statistical inference methodology (Highest Density Regions) is adopted. Chapter 7 reapplies the High Density Regions methodology and bootstrap half-life estimation to the data used in Chapters 2 and 5. This provides a robustness check on the results of standard unit root tests that were applied to the data in those chapters. Main findings of the thesis are as follows. The long run implications of real business cycle models are largely rejected by the Australia data. This finding holds for both the existence of great ratios and when the explicit decision rules are employed. When the small open economy features of the Australian economy are incorporated in a two country RBC model, a country-specific productivity boom seems to provide a possible explanation for the rise in Australia??s share of world output. The essays that examine real interest rates suggest the following results. Following the East Asian financial crisis in 1997-98 there appears to have been a decline in the importance of Japan in influencing developments in the Pacific Basin region. In addition there is evidence that following the crisis Korea??s financial market became less insular and more integrated with the US. Finally results obtained from the half-life estimators suggest that despite the usual findings from unit root tests, real interest rates may in fact exhibit mean-reversion.

The study attempts to apply the DEFCON Concept as an early alert system to Non-Performing-Loan (NPL) Management in Taiwan’s Banking Industry. The recent financial crises in South East Asia have stimulated a significant body of empirical research on the subject of potential leading indicators for banking crises. Specifically, a number of statistical models have been developed to provide early warning signals of impending risks and also the relationship between the NPL and those leading indicators. The purpose of this study is to 1) Explain the definition of DEFCON and the application of DEFCON in the banking industry, 2) The literature review is on the correlation between Non-Performing Loans and Macroeconomic variables, giving particular importance to regression models. 3) The methodology of DEFCON Planning includes the data used, variables selection via the coefficient analysis, a simple regression model and usage of the selected variables to set the DEFCON triggers 4) Ultimately, to help aid in what Bank’s can undertake under different levels of DEFCON to prevent potential loss. Our empirical results show that 1) Economic Growth Rate 2) the Leading Index 3) Bounced Check Rate, 4) Shinyi Housing Index 5) Unemployment Rate 6) Consumer Price Index 7) Consumer Debt 8) M1B currency supply and 9) Unemployment Rate, are the leading indicators that predict Taiwan’s NPL ratio; however, it is prudent to note that the NPL ratio may be manipulated by banks, and may result to inaccurateness in some indictor’s prediction of the model. It is imperative that constant monitoring be the practice to ensure the effectiveness of the model. The Banks in Taiwan should monitor the overall DEFCON status periodically and use it as early alert system and take proactive actions based on the level of economic deterioration (DEFCON level) to well manage their asset and reduce NPL.

This thesis is a contribution to the analysis of the relationship between the economic growth and the usage of non-renewable energy resources. More precisely, it is studied the conditions under which energy-saving technologies can sustain long-run growth, even if energy is mainly produced by means of non-renewable energy resources, such as fossil fuels. A general equilibrium framework is considered, giving special attention to the dynamical properties of the economy. In accordance with the well-known debate of complementarity vs. substitutability between physical capital and energy as production inputs, this thesis is divided into two parts. The first part of this thesis assumes complementarity between physical capital and energy as production inputs, which captures the idea of the existence of a minimum energy requirement to use a machine. Even if in contrast with the standard literature on non-renewable energy resources, which assumes substitutability, the assumption of complementarity is indeed supported by various empirical studies. This relationship of complementarity allows one to introduce the assumption of different generations of machines coexisting in each period by adding a new variable to the firm's problem: physical capital replacement. In this first part of the thesis, it is provided a theoretical study of physical capital replacement, i.e., vintage effect, which is an important environmental policy when new machines are assumed to be more energy-saving. Following the standard literature on non-renewable energy resources, this second part of the thesis assumes substitutability between capital and energy. This branch of the literature gives central position to physical capital accumulation to offset the constraint on production possibilities due to use of non-renewable energy resources. This literature assumes the same technology for both physical capital accumulation and consumption, which implies (among other things) that the energy intensity of both sectors is the same. However, data do not support this implication and suggest that physical capital accumulation is relatively more energy-intensive than consumption. Following that, this second part of the thesis studies the implications of this hypothesis.

The first essay constitutes a theory which lends truth to the Kuznets hypothesis. The attention is centered on the role of financial markets in defining the process of knowledge accumulation, and ultimately the distribution of income earning capabilities in a population of ex ante heterogeneous individuals. The provision of credit is hindered by one-sided lack of commitment embedded in the area of educational investment. Adaptation in the legislative system to accommodate a punishment scheme conditional on default is the critical requirement for the economy to be carried on a dynamic growth path, albeit one of higher and worsening inequality. Owing to the accumulation of human capital and the associated externality on future generations’ knowledge productivity, the economy ultimately makes its transition to a state of lower income differentials. The second essay is an enquiry on the role of monetary policy in determining the growth dynamics of a small open economy. We postulate that the possibility of intermediated credit does not exist, the intention of the assumption being to uncover the role of inflation as tax on private spending. The analysis brings a valid argument of the superneutrality of money. Inflation when operating as consumption tax has no impact on the growth rate of output. This is established irrespective of the labor supply be held fixed, or incorporated as endogenous decision. When imitating the role of capital taxation, inflationary policy has a negative effect on capital accumulation in a framework of fixed labor supply. However, the validity of the superneutrality result is once again reestablished in an environment accommodating the endogeneity of labor supply. The third essay is a theoretical investigation of the long-run effects of tax and expenditure policies in an open economy framework. The aim is to establish an analytic basis for the factual evidence associated with the non-monotonic response of the current account to fiscal shocks. To this endeavor we sought two sources of time non-separability in the preference structure, habit-forming consumption in consumer durable goods. Optimal private choices induce non-monotonic dynamics on consumption behavior that are exactly consistent with the evidence on the current account.

ABSTRACT In this thesis, I evaluate how fiscal and monetary stimulus policies contribute to the economic recovery process of recessions in the United States. Using a case study approach, I will study ten major recessions over the 20th century and early 21st century to answer this question. I will study the different fiscal and monetary policies implemented during the following recessions: the Great Depression; the Recession of 1937, the Recession of 1945, the Recession of 1953, the 1973-75 Recession, the 1980 Recession, the Early 1980s Recession, the Early 1990s Recession, the Early 2000s Recession, and the Late-2000s Recession. The literature suggests a wide range of conflicting viewpoints as to the most effective stimulus policies for economic recovery. I conclude that while both monetary and fiscal stimulus policies have been effective in contributing to GDP growth and reductions in unemployment, it is evident that each recession requires a unique policy response. In many cases, I find value in implementing both monetary and fiscal policy, jointly, as they complement one another. I also find that, generally, monetary policy is most effective in contributing to the economic recovery process of recessions through open market operations that reduce the interest rate and that fiscal policy is most effective in contributing to the economic recovery process of recessions through government spending. My systematic exploration of these policies and the recession case studies, provide valuable information of the effects of these policies and provide insight into the appropriate use of stimulus policies in the current economy and for future recessions and recoveries.