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Essays on macroeconomic fluctuations

Drechsel, Thomas (2018) Essays on macroeconomic fluctuations. PhD thesis, The London School of Economics and Political Science (LSE).

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Abstract

This thesis investigates fluctuations in the macroeconomy, from both empirical and theoretical angles, and in the context of developed as well as emerging economies. Chapter 1 focuses on the role of firm borrowing for macroeconomic fluctuations in the United States. It presents micro-level evidence which highlights that firms’ access to debt is constrained by their current earnings. Such a constraint leads to predictions about the transmission of investment shocks that are different from a traditional collateral constraint. The chapter tests these predictions using both aggregate and firm-level data. Empirical dynamics in the times series and crosssectional dimension strongly support the relevance of the earnings-based borrowing constraint. Chapter 2 turns to an open economy context and tackles the question of how important movements in international commodity prices are for emerging economy boom and bust cycles. For the case of Argentina, the chapter quantifies this nexus and finds a sizeable influence of commodity price shocks for movements in output, consumption and investment. Chapter 3 demonstrates that misspecification of macroeconomic models can have severe consequences when estimating those models on the data. It proposes a novel concept to alleviate this concern, so-called agnostic structural disturbances (ASDs). The idea behind ASDs is to enrich the empirical specification of models while relying on relatively loose assumptions about how this restricts the dynamics. Chapter 4 is concerned with tracking economic activity in real time. It develops a dynamic factor model that allows for changes in both the long-run growth rate of output and the volatility of business cycles. It documents a significant decline in long-run output growth in the United States most of which occurred prior to the Great Recession. The proposed model is capable of detecting shifts in long-run growth in a timely and reliable manner.

Item Type: Thesis (PhD)
Additional Information: © 2018 Thomas Drechsel
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Supervisor: Tenreyro, Silvana
URI: http://etheses.lse.ac.uk/id/eprint/3876

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