Thesis advisor: Susanto Basu / My dissertation consists of three independent chapters analyzing parameter estimation and structural change in applied macroeconomics. A first theme linking these papers is structural change, especially as it relates to the monetary policy transmission mechanism through the Phillips curve. A second theme is an assessment of small-sample statistical inference for impulse response functions after estimating macroeconomic models. Two of my chapters provide simulation studies of statistical coverage of standard test statistics after estimating impulse response functions in both atheoretical (local projection) and highly structural (dynamic stochastic general equilibrium) models. The first chapter of my dissertation, ``Using Survey Expectations to Estimate the New Keynesian Phillips Curve,'' provides new estimates of the parameters in the New Keynesian Phillips Curve, exploiting survey based expectations data provided by the Survey of Professional Forecasters and the Michigan Survey of Consumers. I find that the use of survey expectations in US data improves the fit of the textbook Phillips Curve model to the data and provides economically sensible estimates of its coefficients. The estimated model provides stable parameter estimates until the Great Recession, after which inflation becomes less dependent on marginal cost. Household and professional forecasts each contribute to the forward-looking component of inflation expectations, with household forecasts given more weight. The second chapter of my dissertation, ``Estimating Structural Breaks in Impulse Response Functions via the Local Projection Estimator,'' proposes an estimator for parameter instability in impulse response functions that are estimated by local projections. I use the estimator to investigate the presence of parameter instability in the Romer--Romer monetary policy shocks. I find evidence of a structural break in the impulse response coefficients in the late 1970s. In the early period, there is strong evidence that monetary policy shocks have real effects. There is little evidence that monetary policy shocks have real effects in the later period. Tax and oil price shocks exhibit little change in their effects on output throughout the postwar period. The third chapter of my dissertation, ``Standard Errors for Impulse Response Functions of Estimated DSGE Models,'' provides a method for constructing appropriate asymptotic standard errors for impulse responses of estimated dynamic stochastic general equilibrium models. The method requires only the matrices characterizing the model solution, the derivatives of those matrices with respect to the underlying structural parameters, and the covariance estimate of the structural parameters themselves. I provide simulation evidence on the small-sample properties of these standard errors. / Thesis (PhD) — Boston College, 2020. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

Debt and credit markets played a crucial role in recent economic history. This thesis is composed of three chapters, each of which explores some drivers of private and public debt accumulation throughout the past decade. The first two chapters are directly linked, and study some behavioural determinants of household debt accumulation in the United States in the run-up to the 2007-2008 financial crisis. The third chapter takes a different perspective, and focuses on the political economy of fiscal reforms. In the first chapter, I study whether the growth in US household debt ahead of the 2007-2008 financial crisis can be attributed to shifts in the distribution of personal income across the US population. The underlying theoretical mechanism is based on the idea that if individuals are concerned with status, rising income inequality within a given social group might lead its relatively poorer members to consume a larger proportion of their resources, due to a desire to emulate the consumption levels of richer individuals (Duesenberry [1949]; Frank, Levine and Dijk [2014]; Bertrand and Morse [2016]). I test this hypothesis by exploiting state-level variation in top incomes over time, following the methodology proposed by Bertrand and Morse [2016]. The results I present in this chapter challenge the status-emulation theory of consumer behaviour during the 2000s credit boom. I show that, between 1996 and 2007, only low and-middle-income home-owners increased their expenditure and debt-to-income ratios as a response to an increase in income inequality in their state of residence. I also show that the growth in income inequality was strongly correlated with house prices growth, across US states and metropolitan areas. The positive correlation between inequality and household debt in the pre-crisis US might therefore be simply explained by the wealth and collateral effects experienced by low and middle-income home-owners living in areas where inequality was growing at the fastest rates. The lifting of credit constraints due to rising house prices have been a major driver of household debt accumulation ahead of the 2007-2008 financial crisis (Mian and Sufi [2011]). However, this effect might have been coupled with a generalized optimistic belief that the growth in house prices was likely to continue in the future (Case, Shiller and Thompson [2012]). The second chapter therefore tests whether consumers hold realistic expectations about the housing market, and whether this is a driver of their consumption and saving decisions. Using the Michigan Survey of Consumers, I show that American households have heterogeneous expectations about the future of house prices, which systematically depend upon household characteristics, as well as upon the history of past house price realizations in the local area of residence. I also analyze individual-level forecast errors to show that house price expectations are biased and inefficient. Changes in individual forecast errors are predictable from past house price realizations in the local area of residence: in particular, forecast errors are positively correlated with recent price trends, and tend to become overoptimistic in good times, and over-pessimistic in bad ones. The predictability of forecast errors from public information available at the time the forecast was made suggests a violation of full-information rational expectations theory. This systematic bias in house price expectations matters because consumers make financial decisions on the basis of their house price beliefs. By exploiting an exogenous shift in housing sentiment, I show that when individuals expect the value of their properties to rise, they borrow against the anticipated increase in home equity. The third and final chapter shifts the focus to the political drivers of public debt and deficits. Public debt crises often call for the intervention of international financial institutions, such as the International Monetary Fund (IMF). In this chapter, I introduce a new panel dataset on planned fiscal policy prescriptions included in all IMF loans between 2002 and 2012, and use it to study how domestic politics of recipient countries influence the content of IMF lending agreements. I show that IMF policy prescriptions depend strongly on domestic politics and that fiscal conditions are shaped by a political force often neglected in public choice literature: the threat of extra-parliamentary opposition, or civil unrest. Extra-parliamentary opposition (measured as a populations’ propensity to riot and demonstrate) significantly reduces the stringency of fiscal policy conditions attached to IMF loans. It also reduces the number of reforms in the realms of public employment and labor markets. These results suggest that fiscal policy has a strong political component even during circumstances when domestic politics are commonly assumed to cease to matter, as they do in IMF agreements. Also, they suggest that voting is not the only mechanism through which politics enters the technical realm of economic policy.

Submitted by Renata Lopes (renatasil82@gmail.com) on 2016-07-25T14:26:38Z No. of bitstreams: 1 andressasueleneugenio.pdf: 539583 bytes, checksum: 699f13c3795fbfe82c55aa249247cfb1 (MD5) / Approved for entry into archive by Adriana Oliveira (adriana.oliveira@ufjf.edu.br) on 2016-07-25T16:35:22Z (GMT) No. of bitstreams: 1 andressasueleneugenio.pdf: 539583 bytes, checksum: 699f13c3795fbfe82c55aa249247cfb1 (MD5) / Made available in DSpace on 2016-07-25T16:35:22Z (GMT). No. of bitstreams: 1 andressasueleneugenio.pdf: 539583 bytes, checksum: 699f13c3795fbfe82c55aa249247cfb1 (MD5) Previous issue date: 2016-02-19 / Este trabalho analisa, primeiramente,acorrelação entre o nível de satisfação auto declarada dos indivíduos brasileiros e duas variáveis macroeconômicas (inflação e desemprego). Posteriormente, busca-se analisar como estas variáveis macroeconômicas controladas por região do país impactam a satisfação dos indivíduos que vivem na região de referência. Considerandoqueasatisfaçãoautodeclaradaéumaboaproxy debem-estar,oscoeficientes estimados podem ser usados para obter uma estimativa dos custos de bem-estar da inflação em relação ao desemprego. Para atingir o objetivo deste trabalho utiliza-se modelos Logit Ordenado e estima-se por máxima verossimilhança, utilizando a satisfação declarada como uma aproximação do bem-estar individual. Além disso, há a inclusão de um vetor de variáveis controlando as características individuais, tais como, situação de emprego, sexo, idade, educação e estado civil, que foram retiradas da pesquisa de opinião pública Latinobarómetro. As variáveis macroeconômicas são disponibilizadas pelo InstitutoBrasileirodeGeografiaeEstatística(IBGE).Osprincipaisresultadosencontrados apontam que: (a) inflação e desemprego impactam negativamente o nível de bem-estar, (b) mantendoautilidadedosindivíduosconstantechega-seaumtrade-off inflação-desemprego de 5,33, (c) há diferenciação de impacto das variáveis da taxa de inflação e da taxa de desemprego agregadas no nível de satisfação controlando por região que o indivíduo vive, e (d) as variáveis de inflação e desemprego por região não impactam o nível de satisfação dos indivíduos que auto declaram-se “muito satisfeitos” com a vida. / This paper analyzes, first, the correlation between the self declared level of satisfaction Brazilian individuals and two macroeconomic variables (inflation and unemployment). Later, we seek to analyze how these controlled macroeconomic variables by of the country impactthesatisfactionofindividualslivinginthereferencearea. Whereastheselfdeclared satisfaction is a good welfare proxy, the coefficients estimates can be used to obtain an estimateofhealthcostsinflationtounemployment. Toachievetheobjectiveofthisworkis used logit models Ordained and is estimated by maximum likelihood using the satisfaction declared as an approximation of individual well-being. Additionally, there is included of a vector of variables controlling the individual characteristics, such as condition employment, gender,age,educationandmaritalstatus,whichweretakenfromresearchLatinobarómetro public opinion. Macroeconomic variables are provided by Brazilian Institute of Geography and Statistics (IBGE). The main results show that: (a) inflation and unemployment negatively impact the welfare level, (b) keeping constant the utility of individuals comes a trade-off inflation-unemployment 5.33, (c) there is differentiation impact of inflation rate and variable rate unemployment in the aggregate level of satisfaction by controlling region that the individual lives, and (d) inflation variables and unemployment by region not impact the level of satisfaction of individuals who self declare themselves "very satisfied" with your life.