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Essays in macroeconomics

This thesis consists of three self-contained chapters. In the first chapter, I present analytical expressions for fiscal multipliers under the Fiscal Theory of the Price Level. In the associated 'fiscal regime', taxation multipliers turn positive, while the government spending multiplier has the same functional form as its counterpart in the 'monetary regime', augmented by a nominal wealth effect. As a result, fiscal multipliers tend to be larger in the fiscal regime, with the degree of price stickiness being a key determinant of their exact sizes. I also analyze the effectiveness of money-financed fiscal stimulus. In the fiscal regime, money-financed stimulus is equivalent to a particular form of debt-financed stimulus. The effectiveness of money-financed stimulus in raising output (relative to in inflation) decreases as monetary policy becomes more responsive to inflation. In the second chapter, I analytically study the effects on economic activity from expected changes to future fiscal variables. I document four transmission mechanisms, the sizes of which depend crucially on the level of nominal rigidities. In general, news shocks to fiscal policy produce larger effects when the policy rate is unresponsive to inflation and when the fiscal authority has the power to issue unbacked nominal debt. Within this framework, I show that 'forward guidance' of fiscal policy can expand economic activity without ever increasing the real value of government debt. In the third chapter, I use the falling relative price of investment to explain the growing divergence between gross and net asset positions in the U.S. A lower investment price leads shadow banks to increase their borrowing and lending (i.e. gross balance sheet) to profit from better investment returns. Although more investment increases the capital stock, a lower investment price also lowers the replacement cost and, by extension, the per-unit market value of capital. Net asset positions remain, as a result, relatively unchanged. I present a stylized model that accounts for these facts.

Identiferoai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:757747
Date January 2017
CreatorsBeck-Friis, Peder
ContributorsFerrero, Andrea
PublisherUniversity of Oxford
Source SetsEthos UK
Detected LanguageEnglish
TypeElectronic Thesis or Dissertation
Sourcehttp://ora.ox.ac.uk/objects/uuid:a44f1735-2957-492c-8cb0-fbfa254d3a6c

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