Chapters one and two of the dissertation investigate the effects of political disagreement on macroeconomic outcomes. I introduce a model of governments with heterogeneous preferences over the composition of consumption between private and public goods alternating in power. Unable to commit to future policies, the party in power has incentive not only to shape consumption according to their preferences but also to manipulate the future state faced by successive governments to influence the decisions of future policy makers. Alternating governments give rise to political business cycles; fluctuations in economy-wide variables due to the political system. Political business cycles help explain the divergence in outcomes of economic variables across countries with different levels of political disagreement and political stability. The first chapter adapts a real business cycle model to include political shocks in addition to the productivity shocks. This is motivated by a key puzzle in the business cycle literature: for emerging economies the volatility of consumption is higher than the volatility of output, a feature of the data that is not explained by standard theory. The goal of this chapter is not only to replicate the data but to understand how consumption responds to political shocks differently than shocks to productivity. This model is also able to recreate endogenously the high level of volatility in government expenditure observed in the data. The model can explain up to 29% of the variation in the relative volatility of consumption across countries. Chapter two focuses on a similar model in the presence of debt instead of capital to develop a positive theory for fiscal policy (debt, expenditure, and deficits) over the business cycle to compare to historical observation. I find that political shocks are important to understand observed U.S. data moments. Chapter three investigates the welfare effects of tax-deferred retirement accounts (similar to Traditional IRAs in the US). I find that such accounts increase aggregate welfare as well as increasing economy-wide inequality. I find from an aggregate welfare perspective the optimal contribution limit for IRAs is to not have a contribution limit. / text

This thesis builds on the established body of research into the suitability of a country joining other countries in a monetary union by focusing on the potential costs resulting from the loss of monetary policy independence that is a corollary to forming a monetary union. We continue in the tradition of several other authors by extracting supply and demand shocks for a range of countries from VAR analysis and comparing the symmetry of these economic shocks between potential members of a monetary union. The theoretical contribution of this thesis is that we explicitly incorporate the size of each potential currency union member in the analysis. This contribution is motivated by the observation that a large country would be a more significant part of a given currency union than would a small country. Thus the monetary policy settings of a given currency union would to a larger extent reflect the economic dynamics of a given country the larger that country is relative to the size of the union overall. Previous authors have largely neglected this issue. We explicitly incorporate the size of each potential members' economy in our analytical framework and re-assess the merits of a range of regions forming a currency union. Using the framework developed, we also inquire into the optimality of current monetary regimes in two regions, the North American continent and in Australia. The first of these is motivated by Mundell's seminal article on currency unions where he asked in largely qualitative terms whether the US and Canada are better currency realms than a hypothetical north south divide of the continent. The second is motivated by the observation that Australia’s economy embodies (economically) very different sub-regions due to the difference importance of commodities production in different parts of the country. We ask whether these different regions experience symmetrical or largely idiosyncratic shocks and find support for the latter.

This dissertation raises a number of policy concerns from a macroeconomic policy point of view and provides additional insights and implications in terms of the effects of fiscal policy and its macroeconomic effects that have kept the open economy macroeconomics literature busy since the early 2000s. The first essay develops a dynamic stochastic general equilibrium (DSGE) model for analyzing the impact of various capital income tax policies in a small open economy that is populated by households possessing endogenous time preferences. I contribute to the literature by studying the impacts of: i) anticipated tax shocks under stochastically growing output, ii) stochastic tax shocks under deterministic output, on a dynamic general equilibrium framework. With the model's specifications, this is the first attempt to integrate uncertainty in the study of taxation and welfare. The results suggest that under certain conditions welfare paradoxes may exist, in the sense that increases in tax instruments may improve welfare. The second essay characterizes the dynamic effects of net tax and government spending shocks on prices, interest rate, GDP and its private components in four OECD countries using structural vector autoregressive regressions (SVAR) approach. For the first time in this literature, I propose a structural decomposition of total net taxes into four components: corporate income taxes, income taxes, indirect taxes and social insurance taxes. The paper provides estimates of the responses of macroeconomic aggregates to innovations in these net tax components. Decompositions of total net tax innovations show that net tax components have different impacts on economic variables. Moreover, the size and persistence of these effects vary across countries depending upon the strength of wealth, substitution, and income effects reflecting the structure of the economies. The last essay estimates the wealth effects of housing and stock market wealth using time-series data for eight developed countries. In estimation I employ the SVAR, which articulate the dynamic interactions of shocks to housing prices, stock values, and disposable incomes. The results show that for these countries the initial consumption response to housing price shocks is greater than to stock market capitalization shocks, but the long-run consumption response to the latter is more persistent than to the former. My findings suggest balanced monetary policies for the developments of housing markets and equity markets.

archives@tulane.edu / People living through changes in their surroundings react to it unexpectedly. Exogenous political, economic and legal changes impact individual behavior in an unpredictable manner. This dissertation uses three papers to give evidence of exogenous shocks affecting individual behavior. First, I study the impact of an economic change. Using business cycle indicators, I show that a change in the employment status of parents causes them to invest higher time with their children instead of exploring new job opportunities in the early months of unemployment. The short term impact of unemployment is favorable for child development even though literature has shown that long term unemployment is detrimental to child well-being. Second, I explore the impact of a spillover of a policy intended to save energy. The Daylight Savings Time was implemented during the World Wars to conserve energy. Over the decades, its impact on energy conservation has diminished. My research shows that there are clear evidences of serious disruption in daily lives of those subjected to the clock change twice a year, causing higher stress and lower sleep in the early weeks of the time change. Third, I study the legalization of medical marijuana on consumption of marijuana and alcohol patterns, as well as criminal behavior among those subjected to it. The results show that even though there is a slight increase in marijuana and alcohol consumption among adults, there is no evidence to support that it encourages teenagers to explore marijuana consumption. There is also no evidence of any change in criminal behavior. / 1 / Sanjukta Basu

The oscillating plasma torch is proposed as a potential device that will produce an oscillating shock and resulting control of the supersonic combustion process. This research will capitalize on previous results [Gallimore, 1998] which indicate that the plasma torch oscillations originate from the inherent oscillations of the voltage applied to the torch. The aim of this research is to thoroughly investigate the oscillation behavior of the plasma torch with the plan of ultimately controlling the oscillation at chosen frequencies. A modulating power system used for dynamic control of the plasma torch oscillation was designed and tested in quiescent conditions (no flow), Mach 2.4 cold supersonic flow, and Mach 2 heated supersonic flow conditions. The oscillating plasma torch used nitrogen feedstock and was operated over a frequency range of 2Hz- 4kHz. A dynamic torch model using the hybrid Mayr-Cassie electric arc model was developed to predict the plasma torch electric arc response at appropriate frequencies for interaction with supersonic combustion. In quiescent conditions, the dynamic response of the plasma torch power system and plasma jet were characterized using signal processing techniques and high speed video imaging. High speed Schlieren images were used to determine the behavior of the oscillating plasma jet in Mach 2.4 cross flow and its influence on the induced shock structure. The unsteady nitrogen-fed torch was integrated with the flush walled 4-hole aerodynamic ramp injector using hydrogen and hydrocarbon fuels at the University of Virginia Aerospace Research Lab (ARL) heated Mach 2 supersonic flow. Unsteady pressure variations from the oscillating shock produced by the plasma torch were recorded using recess-mounted Kulite pressure transducers. Also, measurements of the static pressure of the combustion produced by the oscillating plasma torch were obtained. The oscillating torch system performed well over a range of different flow conditions. It will enable active control input to the combustion process. The controllable unsteady blockage might provide a type shock interaction needed to increase turbulence and mixing augmentation [Kumar, et al. 1987]. / Master of Science

Master of Arts / Department of Economics / Lance J. Bachmeier / The traditional view of oil price movements is that they represent exogenous changes in the supply of oil. In that case, oil price increases will hurt output. Recently, some have questioned whether oil price increases are actually due to higher demand for oil, in which case higher oil prices will be followed by higher output. This thesis develops a model that allows changes in the price of oil to have different effects depending on whether the price of oil and output growth are moving in the same direction (so that the increase in the price of oil was primarily due to an increase in the demand for oil) or in the opposite direction (so that the increase in the price of oil was primarily due to an oil supply shock). The paper presents three sets of results. First, we present the model results for the 1965-2008 time period. Then we look at the 1986-2008 period separately. Finally, we construct a forecasting model for the U.S. industrial production index. The model developed does not require making identifying assumptions and can be used with the data that is available on the internet, and is well understood. Maximum likelihood estimation, which is commonly used for non-linear estimation, is used to estimate the model. We find in-sample evidence in favor of our new model for the 1986-2008 subsample. The new model is unable to provide better out-of-sample forecasts for the 1986-2008 time period.