Essays in macroeconomics and international economics

Soenarjo, Aditya Wirabuana (2024) Essays in macroeconomics and international economics. PhD thesis, London School of Economics and Political Science.

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Abstract

This thesis is composed of three chapters exploring questions in Macroeconomics and International economics. The first chapter studies the role of the liquidity position of households in their decision to change their sector of work after unemployment. I provide causal evidence that displaced workers with access to liquidity are more likely to switch industries. To do so, I rely on a regression kink design approach using data from Washington state and show that a $10 increase in weekly benefits raised the propensity of switching by 0.55 percentage points. Upon re-employment, I find that switchers initially have 10 percentage points lower earnings than stayers, but the gap reverses within two years. To rationalise these findings, I develop a quantitative framework that features incomplete markets, multiple sectors, and costly labour reallocation. More liquidity enables displaced workers to reallocate across sectors while smoothing out earnings losses and leaving unemployment faster. According to the model, more generous unemployment insurance fosters more reallocation. When shocks affect sectors unevenly, this leads to less severe recessions. The second chapter studies the effect of the integration of an economy into a Global Value Chain (GVC) and its consequences on inflation dynamics. We demonstrate analytically that an increased reliance on imported intermediate goods, serving as a GVC proxy, results in a flatter Phillips curve. We find evidence indicating that UK industries with higher proportions of intermediate imports from Emerging Market Economies (EMEs) exhibit a flatter Phillips curve. This observation stems not only from the impact of the GVC integration on the slope but also from the influence of cyclical forces that shape firms’ marginal costs via international relative price fluctuations. The third chapter studies the role of transfers made by migrants to their families back home - hereafter known as remittance flows. This chapter documents five facts regarding the micro-level patterns of international remittance flows by leveraging administrative data from a large global money transfer operator (MTO). First, we find that remittance senders use their local currency as the reference currency as opposed to the recipient’s local currency. Second, we find that an individual sender’s remittance amount doesn’t change frequently. Therefore, remittance flows are sticky in the sender’s currency. Third, we find that on average, a given sender has multiple recipients, which tend to be located in one country. Fourth, we find that the recipient’s local currency is the most common receiving currency, but the U.S. dollar is a prominent receiving currency in some Emerging Markets. Fifth, we find that during the pandemic, there was an increase in the number of transfers and volume of remittance flows through the MTO and this was driven in equal parts by existing and new senders to the platform.

Item Type:	Thesis (PhD)
Additional Information:	© 2024 Aditya Wirabuana Soenarjo
Library of Congress subject classification:	H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions
Sets:	Departments > Economic History
Supervisor:	Reis, Ricardo and Moll, Ben and Den Haan, Wouter J.
URI:	http://etheses.lse.ac.uk/id/eprint/4641

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