Carreras Baquer, Oriol
(2016)
Essays in macroeconomics.
PhD thesis, London School of Economics and Political Science.
Abstract
This thesis contains four chapters. The first chapter establishes a negative empirical correlation between the share of employees working under a temporary contract and the share of employees with high educational attainments employed in jobs for which they are overqualified. Subsequently, I show that a search and matching model with heterogeneous jobs and workers with directed search can explain this correlation. Temporary contracts induce entrepreneurs to post, in relative terms, more vacancies for jobs with low educational requirements thus reducing the time (cost) of finding one such job. As a result, some unemployed agents with high educational levels that were previously looking for a job that matched their level of formation may find it attractive to switch and start searching for one such easy to find job for which they are over-qualified.
The second chapter compares the magnitude of fiscal multipliers at the zero lower bound in New Keynesian models with those that arise from a large-scale global semi-structural model (NiGEM). I find that, in NiGEM, once I impose the zero lower bound constraint, multipliers increase, as the literature predicts, but by a much smaller factor than in New Keynesian models. Whereas New Keynesian models predict multipliers well above one, or even larger than two, multipliers in NiGEM remain below one. All of the channels, highlighted by the literature, through which the zero lower bound operates to generate multipliers larger than one are operating in NiGEM but one. Contrary to the predictions of open economy New Keynesian models, a fiscal expansionary shock when the economy is stuck at the zero lower bound does not crowd in foreign demand for home goods in NiGEM. In addition, I also find that the results are sensitive to the degree of expectational myopia. Once I modify NiGEM to reduce the degree of expectational myopia and produce a foreign demand crowd in effect, I obtain that the predictions of the model become more in line with those of the New Keynesian literature.
The third chapter describes the cyclical behavior of the relative price of investment using three different measures: instantaneous correlations on data detrended using the HodrickPrescott filter, correlations on VAR forecast errors and instantaneous correlations on frequencydomain filtered data. All three measures suggest that the relative price of equipment goods is countercyclical. Instead, the relative price of household and total private investment is countercyclical according to the correlations computed on VAR forecast errors and frequencydomain filtered data while correlations on data detrended using the Hodrick-Prescott filter suggest that the relative price of household and total private investment is procyclical.
The fourth chapter reviews the theoretical and empirical literature on macroprudential policies and tools and tests empirically the effectiveness of several macroprudential policies and tools. We find evidence that macroprudential polices are effective at curbing house price and credit growth, albeit some tools are more effective than others. These include, in particular, taxes on financial institutions and strict loan-to-value and debt-to-income ratio limits.
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