http://hdl.handle.net/1974/772 2013-05-21T05:32:43Z http://hdl.handle.net/1974/7989 Title: National and International Business Cycles : the Role of Financial Frictions and Shocks Authors: Rouillard, JEAN-FRANCOIS Abstract: This dissertation investigates the effects of frictions that emerge from financial markets on business-cycle fluctuations. The purpose of Chapter 1 is to situate my work in the literature and to stress its contributions. In Chapter 2, I reassess the role of financial frictions in amplifying the impacts of productivity shocks using a framework in which a fraction of firms are borrowing-constrained and land is a collateral asset. A first finding is that amplification effects are much lower when land is supplied elastically. However, financial shocks that affect the maximum allowable ratio of loans to collateral have greater effects on output. Another result pertains to the role of the elasticity of substitution between land and capital in responses to financial shocks: lower values generate greater output responses. While Chapter 2's environment is set up to be in a closed-economy, the last two chapters involve two-country settings. Chapter 3 still intersects with Chapter 2 on some dimensions, in particular, land dynamics and financial frictions that feature borrowing-constrained firms. The borrowing mechanism brings about a distortion in labour markets that interacts with a class of preferences that are non-separable between consumption and leisure. Technology shocks contribute to explain international co-movements, whereas financial shocks allow the model to replicate the lack of international risk sharing that is characterized by the quantity anomaly and the Backus-Smith puzzle. In Chapter 4, I apply Chari, Kehoe and McGrattan’s (2007) business cycle accounting method to a two-country, two-good real business cycle model. Using their approach, I measure the same closed-economy time-varying wedges and I introduce an international wedge that accounts for discrepancies between the growth in real exchange rates and in the stochastic discount factors ratio. In fact, the effects of financial frictions embedded in Chapter 3's framework can be retrieved from a combination of labour and investment wedges. The volatility of the international wedge corresponds to a metric of bilateral risk sharing. An important finding is that, from a non-separable preferences specification of the baseline model, the investment wedge partly accounts for the Backus-Smith puzzle. This suggests that distortions in national capital markets are important to consider for international risk sharing. Description: Thesis (Ph.D, Economics) -- Queen's University, 2013-04-29 22:56:23.03 2013-04-30T04:00:00Z http://hdl.handle.net/1974/7713 Title: Measuring Forecasters' Perceptions of Inflation Persistence Authors: Jain, MONICA Abstract: This dissertation presents a new measure of U.S. inflation persistence from the point of view of a professional forecaster. In chapter 2 I explore two different measures that give insight into the views of professional forecasters and link their views with U.S. inflation data. One of these measures, given by the persistence implied by forecast revisions, appears to have similarities with actual inflation persistence over the 1981–2008 sample period. Chapter 3 explores forecast revisions in a more general setting allowing forecasters to have their own views on inflation persistence as well as a unique information set. This chapter builds a measure of perceived inflation persistence via the implied autocorrelation function that follows from the estimates obtained using a forecaster-specific state-space model. When compared to the autocorrelation function for actual inflation, forecasters tend to react less to shocks that hit inflation than the actual inflation data would suggest. This could be due to increased credibility of the Federal Reserve, but it could also be a result of a bias in the underlying inflation forecasts. Chapter 4 focuses on this issue and finds that the reluctance of forecasters to make revisions to their previously announced forecasts causes their estimates of perceived inflation persistence to be understated as their announced inflation forecasts differ from their true inflation expectations. This chapter also presents a method to undo this bias by retrieving their true inflation expectations series. Description: Thesis (Ph.D, Economics) -- Queen's University, 2012-12-21 15:39:23.616 2013-01-04T05:00:00Z http://hdl.handle.net/1974/7690 Title: Essays on Commitment and Optimal Public Policies Authors: Garon, JEAN-DENIS Abstract: We focus on the design of optimal policies in the event of commitment problems. In the first essay, we characterize how income should be redistributed within and across generations. The time-inconsistency problem arises when the government cannot commit to the future retirees' nonlinear tax schedule. Because retired individuals have revealed their private information during the active period of their lives, the government has an incentive to misuse it and to implement more redistribution than a regular second-best policy would prescribe. We study the set of equilibria that can be sustained if the government is infinitely lived, and the households are short-lived. Second, we derive an optimal linear pension scheme when individuals need forced savings as a commitment device. We do so with time-inconsistent preferences, whereby forced savings are the outcome of a paternalistic social welfare maximization process. We then derive the optimal scheme when individuals have self-control preferences.In both cases, we study the conflict between the forced-savings and redistributive roles of public pensions. We show that the non-paternalistic pension system may exhibit more forced savings and be less redistributive than the paternalistic one. The third essay analyzes whether centralizing or decentralizing the provision of public goods may influence the threats of secessions in a federation. We use a simple model with two regions, in which one of them may decide to secede even if it would be socially optimal, from the standpoint of the whole federation, to keep it united. Centralization offers both benefits and costs for individual regions. We show how centralizing generates a cost to secede if centralizing the provision of public goods requires an investment in joint institutions that cannot be perfectly recovered if the federation is dissolved. However, because a centralized provision of public goods does not match local preferences as well as a decentralized one, it also generates a long-run cost to remain in the federation. Description: Thesis (Ph.D, Economics) -- Queen's University, 2012-12-12 14:37:20.574 2012-12-12T05:00:00Z http://hdl.handle.net/1974/7587 Title: Search and Information Frictions in Decentralized Markets Authors: Stacey, Derek Abstract: This thesis studies the importance and implications of information asymmetry in decentralized markets with search frictions. The first chapter provides an introduction and literature review. In the next chapter, I propose a model of the housing market using a search framework in which sellers are unable to commit to asking prices announced ex ante. Relaxing the commitment assumption prevents sellers from using price posting as a signalling device to direct buyers' search. Adverse selection and inefficient entry on the demand side then contribute to housing market illiquidity. Real estate agents that can facilitate the search process can segment the market and alleviate information frictions. In Chapter 3, I further study the importance and implications of the commitment assumptions embedded in directed search models. I eliminate commitment to take-it-or-leave-it trading mechanisms in a model of the labour market with worker heterogeneity and a matching process that allows for multiple firms to match with a single worker. When workers and firms cannot commit to ex ante offers, to an allocation rule, or to an ex post bargaining strategy, the equilibrium is necessarily inefficient. This is true for a broad class of protocols for wage determination, of which bilateral bargaining and Bertrand competition are special cases. Finally, Chapter 4 presents a theory of land market activity for settings where there is uncertainty and private information about the security of land tenure. Land sellers match with buyers in a competitive search environment, and an illiquid land market emerges as a screening mechanism. The implications of the theory are tested using household level data from Indonesia. As predicted, formally titled land is more liquid than untitled land in the sense that ownership rights are more readily transferable. Description: Thesis (Ph.D, Economics) -- Queen's University, 2012-10-09 22:03:23.045 2012-10-11T04:00:00Z