Dissertations / Theses on the topic 'Monetary and Fiscal Policy'

COORDENAÇÃO DE APERFEIÇOAMENTO DO PESSOAL DE ENSINO SUPERIOR
O presente trabalho tem objetivo de caracterizar as políticas fiscal e monetária ótimas e avaliar o comportamento do ganho de bem estar fruto do uso destas políticas. Para isto, utilizamos um modelo com rigidez de preços e concorrência monopolística em que a taxa de juros nominal e gasto público tem efeitos reais na economia, seguindo a literatura Novo- Keynesiana. Observamos que existe ganho no uso conjunto das políticas fiscal e monetária vis-à-vis o caso de independência destas políticas. Quanto maior a potência da política fiscal, maior a substituição do instrumento monetário pelo instrumento fiscal na gestão das políticas ótimas. Finalmente, quanto menor a persistência e/ou maior a volatilidade relativa da política fiscal no caso de independência, maior o ganho de bem estar em adotar as políticas ótimas.
The purpose of this work is to identify the optimal monetary and fiscal policy and to evaluate the welfare gains resulting from the cooperation of such policies. Based on a New-Keynesian approach, we investigate a model with price rigidity and monopolistic competition in which the nominal interest rate and the public spending have real effects on the economy. We found gains in the use of both fiscal and monetary instruments, compared to a framework of independence. As the power of the fiscal policy increases, there are welfare gains in substituting interest rate setting by public spending. There are also increasing welfare gains in cooperation when the fiscal policy is less persistent and/or more volatile in relation to other shocks.

Esta tesis estudia cuestiones de política monetaria y fiscal en macroeconomías con fricciones financieras.
El Capítulo 1 analiza numéricamente el funcionamiento de reglas de política monetaria en economías con y sin imperfecciones financieras. El capítulo compara una política monetaria endógena con una regla de crecimiento del dinero constante en un escenario de participación limitada. Las imperfecciones surgen por información asimétrica en la producción de capital. El modelo se ajusta bastante bien a los datos de EE.UU. El escenario con imperfecciones financieras es capaz de reflejar algunos hechos estilizados del ciclo económico, como la relación negativa entre producto y prima de riesgo, que no aparecen en el caso estándar sin fricciones. El uso de reglas de tipos de interés en un modelo de participación limitada tiene efectos estabilizadores contrarios a los de los modelos neo-Keynesianos. Concretamente, en un modelo de participación limitada, usar reglas de tipos de interés ayuda a estabilizar producto e inflación frente a un shock tecnológico, mientras que existe un trade-off entre estabilizar producto e inflación si el shock es a la demanda de dinero. Finalmente, los efectos de una regla de Taylor son más fuertes -más estabilizadores o más desestabilizadores- cuando hay fricciones financieras.
El Capítulo 2 utiliza datos de EE.UU. de posguerra para analizar si las fricciones financieras pueden haber contribuido a reducir la variabilidad del producto y la inflación desde los 80. Los datos sobre producto, inflación, tipo de interés y prima de riesgo indican un punto de ruptura en 1981:2, tras el cual estas variables son menos volátiles. El modelo anterior se utiliza aquí para calibrar una regla de tipos de interés para cada submuestra. Sin fricciones financieras, los resultados confirman el reconocido cambio en la política monetaria al presentar reglas bastante diferentes antes y después de 1981:2. Sin embargo, en contraste con la literatura empírica, la calibración no refleja un mayor peso sobre la estabilización de la inflación después de 1981:2. Sorprendentemente, con un nivel positivo de costes de control, la calibración presenta dos reglas mucho menos distintas que aquellas encontradas en ausencia de imperfecciones. Las reglas calibradas sí que asignan un mayor peso a la estabilización de la inflación y menor a la del producto tras 1981:2, a diferencia del caso de costes de control cero. Cuando la regla, costes de control, y shocks cambian entre submuestras, la calibración presenta dos reglas con más peso a la estabilización de la inflación y menos a la del producto después de 1981:2. El grado de fricciones financieras cae un 10% tras 1981:2.
El Capítulo 3 estudia las consecuencias en crecimiento y bienestar de imponer límites de deuda a la restricción presupuestaria del gobierno. El modelo presenta crecimiento endógeno y permite al gasto público tener dos papeles diferentes, bien como factor productivo o bien como servicios en la función de utilidad (en este caso, el capital privado genera crecimiento.) En el largo plazo, sin límites de deuda, mayores impuestos sobre el trabajo reducen el crecimiento, independientemente del papel desempeñado por el gasto público. Con límites de deuda, mayores impuestos sobre el trabajo aumentan el crecimiento si el gasto público es productivo. También se analiza la dinámica de una política fiscal más restrictiva para alcanzar un límite de deuda menor, cuando el gasto público es productivo. Mayores impuestos sobre el trabajo para reducir la deuda llevan a un nuevo estado estacionario con mayor crecimiento y menores impuestos, debido al papel productivo del gasto público. Igualmente, un menor ratio de gasto público-producto reduce el crecimiento y producto. Mayores impuestos sobre el trabajo conllevan menos costes de bienestar que cortes en el gasto público para reducir la deuda.
This dissertation analyzes monetary and fiscal policy issues in macroeconomies with financial frictions.
Chapter 1 analyzes numerically the performance of monetary policy rules in economies with and without financial imperfections. Endogenously driven monetary policy is compared to a constant money growth rule in a limited participation framework. The imperfections arise due to asymmetric information emerging in the production of capital. The model economy fits US data reasonably well. The setup with financial imperfections is able to account for some stylized facts of the business cycle, like the negative correlation between output and risk premium, which are absent in the standard frictionless case. The use of interest rate rules in a limited participation model has the opposite stabilization effects compared with new Keynesian models. More concretely, in a limited participation model, using interest rate rules helps stabilize both output and inflation in the face of technology shocks, whereas there is a trade-off between stabilizing output and inflation if the shock is to money demand. Finally, the effects of a Taylor rule are stronger -either more strongly stabilizing or more strongly destabilizing- when there are financial frictions in the economy.
In Chapter 2, postwar US data are employed to analyze whether financial frictions may have contributed to reduce the variability of output and inflation since the 1980s. Data on output, inflation, interest rate, and risk premium indicate a structural break at 1981:2, after which these variables become less volatile. The model economy of Chapter 1 is used to calibrate an interest rate rule for each subsample. Without financial frictions, the results confirm the widely recognized change in the conduct of monetary policy by reporting substantially different rules before and after 1981:2. However, in contrast with empirical literature, the calibration fails to assign more weight to inflation stabilization after 1981:2. Interestingly, when a positive level of monitoring costs is introduced, the procedure yields two calibrated rules that are much less different than those found in the absence of frictions. Furthermore, the calibrated rules do report a stronger weight to inflation and less to output stabilization after 1981:2, as opposed to the zero monitoring costs case. When the rule, monitoring costs, and shocks are allowed to change across subsamples, the calibration reports two interest rate rules that assign more weight to inflation and less to output stabilization after 1981:2. Also, the degree of financial frictions is 10% less after 1981:2.
Chapter 3 studies the growth and welfare consequences of imposing debt limits on the government budget constraint. The model economy displays endogenous growth and allows public spending to have two different roles, either as productive input or as services in the utility function (in this case private capital drives growth). Introducing debt limits is determinant for the growth effects of different fiscal policies. In the long run, without debt limits, the growth effects of raising taxes on labor income are negative regardless of the role of government spending. Interestingly, with debt limits, higher labor tax rates affect positively growth if government spending is productive. The chapter also analyzes the dynamic effects of imposing a more restrictive fiscal policy in order to attain a debt limit with a lower debt to output ratio, for the case of productive government spending. Raising taxes to lower debt leads to a new balanced growth path with higher growth and lower taxes, because of the productive role of government spending. By the same reason, a fiscal policy consisting of reducing government spending over output has the opposite effects, reducing growth and output. Finally, raising labor income taxes implies a lower welfare cost of reducing debt than does cutting spending.

The thesis is divided into three chapters.

1) I study how monetary policy should be optimally designed when households show financial wealth heterogeneity.
Main results: thanks to its ability to affect interest payments volatility, monetary policy has real effects even in a flexible-price cashless-limit environment; second, in a setup with nominal rigidities, price stability is no longer optimal. The extent of deviation from price stability depends on the initial level of debt dispersion.

2) I assess the role of housing price movements in influencing the optimal design of monetary policy.
Under the optimal simple rule, housing price movements should not be a separate target variable in addition to inflation. Furthermore, the welfare loss arising from targeting housing prices becomes quantitatively more significant the higher the degree of access to the credit market.

3) I analyze the effects of fiscal policy in a currency area.
Results: a public spending shock in one region increases private agents demand for imports and appreciates the terms of trade; second, a countercyclical fiscal rule can restore the Taylor principle, the uniqueness of the equilibrium and reduce macro-volatility.

Aquesta tesi contribueix a la literatura que analitza conjuntament la política fiscal i monetària. Des de l'inici de la crisi econòmica mundial al 2007-2008, moltes economies desenvolupades han experimentat notables fluctuacions econòmiques. La majoria de polítiques estabilitzadores en aquests països han consistit en grans estímuls fiscals que han endegat el debat sobre quines polítiques, particularment política monetària, caldrà implementar per tal de sostenir o ajustar el deute públic generat. El meu treball estudia el disseny de polítiques en un entorn dinàmic d'equilibri general on totes les forces descrites anteriorment hi tenen un paper. En el primer capítol, utilitzo un model New Keynesian per a estudiar la política monetària i fiscal òptima en un entorn on la barrera del tipus d'interès no negatiu condueix l'economia a la trampa de la liquiditat. L'efectivitat de les polítiques en aquest entorn està determinat per si el govern pot emetre deute públic o no. Quan el govern no pot generar deute, es veu obligat a utilitzar l'instrument de la despesa. En canvi, si el govern pot generar deute, és òptim utilitzar instruments recaptadors com els impostos sobre el treball ja que les distorsions d'aquest instrument poden ajustar els problemes generats pel deute quan s'entra en la trampa de la liquiditat. A més a més, demostro que el risc de caure en la trampa de la liquiditat condueix el govern a acumular deute de manera que el risc de arribar a la barrera del tipus d'interès no negatiu. En el segon capítol, estudio com la com la velocitat òptima del ajustament del deute públic, i el conjunt de polítiques necessàries per aconseguir-lo, depenen de l'estructura de pagaments del deute. Sota l'assumpció que el deute pren la forma de bons nominals a un període, per a nivells plausibles de deute, la sostenibilitat fiscal requereix un ràpid ajustament del deute mentre la política monetària s'encarrega d'acomodar les fluctuacions. Pagaments de deute més dissipats cap al futur alteren els incentius del govern per alterar les polítiques presents i per a fer ajustos que modifiquin el preu de l'endeutament en el futur. Tenint en compte un nivell plausible de l'escala temporal de pagaments del deute, fa l'ajustament del deute molt més gradual, cosa que està en línia amb l'evidència empírica sobre la persistència del deute públic. En el cas d'una cartera de bons, amb un període de venciment que d'anys o més, no és òptim que la política monetària s'utilitzi per a acomodar les fluctuacions. En el tercer capítol, faig una extensió de la teoria de risc sobirà d'Uribe (2006) en l'entorn d'una unió monetària amb mercats incomplets. En aquest cas, les polítiques d'impagament no només serveixen per garantir la sostenibilitat fiscal i escapar de possibles inflacions explosives sinó que poden servir com assegurança de les llars contra risc fiscal específic de cada país. Caracteritzo analíticament una solució de les dinàmiques de primer orde del model i comparo l'equilibri amb el cas en que hi ha mercats complets. Per tal que aquest dos escenaris coincideixin, cal que la política de pagaments sigui imperfectament discriminatòria. Un resultat complementari és que, sota el supòsit discriminació imperfecta, canvis en la política monetària afecten l'economia real en els períodes d'ajustament del deute fins i tot en l'absència de rigideses nominals. Finalment, descric el disseny d'una política d'impagament que aconsegueix portar l'economia al escenari de mercat complets.
This thesis contributes to the literature on the joint analysis of monetary and fiscal policy. Since the onset of the global economic downturn in 2007-2008, many advanced economies experienced large economic fluctuations. Stabilizing policy responses in those countries often included large fiscal stimulus packages that in turn triggered discussions of the policy measures---including monetary policy---that would ensure debt sustainability or perform debt adjustment if required. In my work I study policy design in the framework of dynamic general equilibrium models that capture such pressing policy issues. In the first chapter I study optimal monetary and fiscal policy in a New Keynesian model with an occasionally binding zero lower bound that leads to liquidity trap episodes. I analyze the use of government spending and labor income tax as components of the discretionary fiscal stimulus package at the liquidity trap. Reliance on either of these instruments depends on whether the government budget is relaxed or has to be balanced. If the government has to balance its budget period by period, it relies more on the spending instrument. Varying the debt burden across time makes the government rely more on the use of labor taxes because discretionary incentives introduced by debt help to reduce the time-inconsistency problem of the tax rate response at the liquidity trap. Moreover, I show that the risk of falling into the liquidity trap leads to the accumulation of the optimal long run government debt buffer that reduces the frequency of reaching the zero lower bound. In the second chapter I study how the speed of optimal government debt adjustment and the monetary-fiscal policy mix that implements it depend on the maturity structure of debt when policy is chosen discretionary. Under the assumption of debt taking the form of one-period nominal bonds, for plausible levels of debt, fiscal sustainability requires prompt adjustment of debt and monetary policy bears a significant burden of implementing the adjustment. Higher average maturity reduces both the incentive of the government to alter current policy and the incentive to strategically affect future self so as to improve the price of borrowing. Accounting for a plausible average maturity makes the optimal debt adjustment much more gradual, which is in line with the existing empirical evidence on the persistence of government debt. In the case of bond portfolios with the average maturity ranging from several years and higher, it is no longer optimal for monetary policy to accommodate debt adjustment. In the thirds chapter I extend a fiscal theory of the sovereign risk by Uribe (2006) into the setting of a monetary union with incomplete markets. Default policy then not only serves the purpose of securing fiscal sustainability and escaping explosive inflation paths but at the same time can take on the role of insuring households across the union against country-specific fiscal risk. I characterize analytically a solution to the model's first-order dynamics and compare equilibrium consumption allocation against a benchmark of the perfect risk-sharing. For these two to coincide one necessary condition has to be satisfied, namely default policy has to be imperfectly discriminatory. The companion result is that, under imperfectly discriminatory default, changes in the monetary policy rule affect real economic activity during the periods of debt adjustment despite the absence of nominal rigidities. Finally, I discuss design of a simple default rule that attains perfect risk-sharing in equilibrium.

This thesis is composed by four chapters on New Keynesian macroeconomics. Chapter 1 develops a small New Keynesian model augmented with a steady state level of public debt and a share of rule-of-thumb consumers (ROTC henceforth) as in Galí et al. (2004; 2007). This chapter focuses on the consequences for the design of monetary and …scal rules, of the bifurcation on the demand side of the economy generated by the presence of ROTC, in the absence of Ricardian equivalence. When …scal policy follows a balanced budget rule, the share of ROTC determines whether an active and/or a passive monetary policy in the sense of Leeper (1991) guarantees determinacy. When a short run public debt asset is introduced, the amount of ROTC determines whether equilibrium determinacy requires a mix of active (passive) monetary policy and a passive (active) fiscal policy or a mix where both policies are active or passive. Chapter 2 studies the equilibrium determinacy of a New Keynesian model augmented with trend inflation, public debt and distortionary taxation. Both the level of long run inflation as well as the stock of steady state public debt have to be explicitly taken into consideration for the characterisation of the equilibrium dynamics between monetary and fiscal policy. Chapter 3 considers the implications of external habits for optimal monetary policy in an otherwise standard New Keynesian model, when those habits exist at the level of individual goods as in Ravn et al. (2006). External habits generate an additional distortion in the economy, which implies that the flex-price equilibrium will no longer be efficient and that policy faces interesting new trade-offs and potential stabilisation biases. The endogenous mark-up behaviour, which emerges with deep habits, signi…cantly a¤ects the optimal policy response to shocks and the stabilising properties of standard simple rules. Chapter 4 analyses both optimal monetary and …scal policy in a New Keynesian model augmented with deep habits and valuable government spending. We …find that, in line with the general consensus in the macro literature, …scal policy adds very little to optimal monetary policy as a stabilisation device.

PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIRO
COORDENAÇÃO DE APERFEIÇOAMENTO DO PESSOAL DE ENSINO SUPERIOR
CONSELHO NACIONAL DE DESENVOLVIMENTO CIENTÍFICO E TECNOLÓGICO
PROGRAMA DE SUPORTE À PÓS-GRADUAÇÃO DE INSTS. DE ENSINO
PROGRAMA DE EXCELENCIA ACADEMICA
Esta tese é composta por 3 capítulos. No primeiro capítulo mostro que quando um banco central não é totalmente apoiado financeiramente pelo tesouro e enfrenta uma restrição de solvência, um aumento no tamanho ou uma mudança na composição de seu balanço pode servir como um mecanismo de compromisso em um cenário de armadilha de liquidez. Em particular, quando a taxa de juros de curto prazo está em zero, operações de mercado aberto do banco central que envolvam compras de títulos de longo prazo podem ajudar a mitigar a deflação e recessão sob um equilíbrio de política discricionária. Usando um modelo simples com produto exógeno, mostramos que uma mudança no balanço do banco central, que aumenta seu tamanho e duração, incentiva o banco central a manter as taxas de juros baixas no futuro, a fim de evitar perdas e satisfazer a restrição de solvência, aproximando-se de sua política ótima de commitment. No segundo capítulo da tese, eu testo a validade do novo mecanismo desenvolvido no capítulo 1, incorporando um banco central financeiramente independente em um modelo DSGE de média escala baseado em Smets e Wouters (2007), e calibrando-o para replicar principais características da expansão do tamanho e composição do balanço do Federal Reserve no período pós-2008. Eu observo que os programas QE 2 e 3 geraram efeitos positivos na dinâmica da inflação, mas impacto modesto no hiato do produto. O terceiro capítulo da tese avalia as consequências em termos de bem-estar de regras fiscais simples em um modelo de um pequeno país exportador de commodities com uma parcela da população sem acesso ao mercado financeiro, onde a política fiscal assume a forma de transferências. Uma constatação principal é que as regras orçamentárias equilibradas para as receitas de commodities geralmente superam as regras fiscais mais sofisticadas, em que as receitas de commodities são salvas em um Fundo de Riqueza Soberana. Como os choques nos preços das commodities são tipicamente altamente persistentes, a renda atual das famílias está próxima de sua renda permanente, tornando as regras orçamentárias equilibradas próximas do ideal.
This thesis is composed of 3 chapters. In the first chapter, It s shown that when a central bank is not fully financially backed by the treasury and faces a solvency constraint, an increase in the size or a change in the composition of its balance sheet (quantitative easing - QE) can serve as a commitment device in a liquidity trap scenario. In particular, when the short-term interest rate is at the zero lower bound, open market operations by the central bank that involve purchases of long-term bonds can help mitigate deflation and recession under a discretionary policy equilibrium. Using a simple endowment-economy model, it s shown that a change in the central bank balance sheet, which increases its size and duration, provides an incentive to the central bank to keep interest rates low in the future to avoid losses and satisfy its solvency constraints, approximating its full commitment policy. In the second chapter, the validity of the novel mechanism developed in chapter 1 is tested by incorporating a financiallyindependent central bank into a medium-scale DSGE model based on Smets and Wouters (2007), and calibrating it to replicate key features of the expansion of size and composition of the Federal Reserve s balance sheet in the post-2008 period. I find that the programs QE 2 and 3 generated positive effects on the dynamics of inflation, but mild effects on the output gap. The third chapter of the thesis evaluates the welfare consequences of simple fiscal rules in a model of a small commodity-exporting country with a share of financially constrained households, where fiscal policy takes the form of transfers. The main finding is that balanced budget rules for commodity revenues often outperform more sophisticated fiscal rules where commodity revenues are saved in a Sovereign Wealth Fund. Because commodity price shocks are typically highly persistent, the households current income is close to their permanent income, so commodity price shocks don t need smoothing, making simple balanced budget rules close to optimal.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2015.
2nd and 3rd chapter co-authored with Matthew Rognlie. Cataloged from PDF version of thesis.
Includes bibliographical references.
This thesis consists of three chapters on monetary and fiscal policy. The first chapter explores the importance of redistribution in explaining why monetary policy has aggregate effects on household consumption. I argue that traditional representative agent models focusing on substitution effects ignore a key component of the monetary policy transmission mechanism, which exists because those who gain from accommodative monetary policy have higher marginal propensities to consume (MPCs) than those who lose. I use a sufficient statistic approach to show that, provided households' elasticities of intertemporal substitution are reasonably small, redistributive effects can be as important as substitution effects in explaining the response of aggregate consumption to real interest rate changes in the U.S. My calibrated general equilibrium model predicts that, if U.S. mortgages all had adjustable rates, the effect of interest-rate changes on consumer spending would more than double and would be asymmetric, with rate increases reducing spending by more than cuts would increase it. The second chapter, joint with Matthew Rognlie, explains why a monetary union between countries (such as the Eurozone today) may lead to a stronger fiscal union. Since exchange rates can no longer adjust to offset shocks, the presence of nominal rigidities implies that fiscal risk-sharing becomes more valuable in a monetary union. As a result, countries in such a union are capable of overcoming their lack of commitment to fiscal transfers. However, inefficient equilibria without fiscal transfers remain possible. We derive implications for the optimal policy of the central bank when the fiscal union is under stress. The third chapter, also joint with Matthew Rognlie, studies the possibility that feedbacks between sovereign bond spreads and governments' desire to default may lead to multiple equilibria in sovereign debt markets. We show that such multiplicity does not exist in the infinite-horizon model of Eaton and Gersovitz (1981), a widely adopted benchmark for quantitative analyses of these markets. Our proof may be important to understand Euro government bond markets, and calls for renewed attention on the theoretical conditions that are needed for sovereign debt models to generate multiple equilibria.
by Adrien Auclert.
Chapter 1. Monetary policy and the redistribution channel -- Chapter 2. Monetary union begets fiscal union -- Chapter 3.Unique equilibrium in the Eaton-Gersovitz model of sovereign debt.
Ph. D.

Mestrado em Economia Monetária e Financeira
O desempenho económico de um país depende sobretudo da relação entre as autoridades monetária e fiscal. Usando dados de painel e um conjunto individual de 14 países da União Europeia desde 1970 a 2012, estudámos as políticas de ambas as autoridades e como as mesmas são influenciadas por determinadas variáveis económicas e eventos (Tratado de Maastricht, Pacto de Estabilidade e Crescimento, euro e crises). Os resultados mostram que a inflação tem um impacto significativo na política monetária e que os governos aumentam o seu saldo primário diante de crescimentos da dívida. Um outro objectivo é caracterizar as interacções que os bancos centrais e os governos nacionais estabelecem, ou seja, se as suas políticas se complementam ou se existe uma política dominante. As nossas provas apresentam uma relação de substituição entre as duas autoridades, onde o banco central assume um papel mais rígido, especialmente no caso de níveis elevados de dívida.
The economic performance of a country depends notably on the relation between monetary and fiscal authorities. Using a panel data and an individual set of 14 EU countries from 1970 to 2012, we study the type of policies of both authorities, and how they are influenced by certain economic variables and events (Maastricht Treaty, Stability and Growth Pact, euro and crises). Results show that inflation has a significant impact on monetary policy, and that governments raise their primary balance when facing debt increases. Another goal is to characterize the type of interactions central banks and national governments establish, i.e. if their policies complement one another or if there is a more dominant one. Our evidence shows a substitution relation between both authorities, where central bank assumes a demanding role, especially in the case of higher levels of debt.

Los modelos Neo-Keynesianos se han impuesto en el análisis de las políticas monetaria y fiscal óptimas. Esta literatura no considera la interacción estratégica entre los agentes económicos y las autoridades de la política económica. En esta tesis, se identifican dos problemas interesantes que no pueden abstraerse de este asunto: las implicaciones de política monetaria en una economía con grandes sindicatos; el mix de política monetaria y fiscal óptimas en una unión monetaria. El primer capitulo muestra cómo la política monetaria determina el nivel de producción y ocupación en el largo plazo, cuando los salarios se fijan en el marco de contratos colectivos. El segundo capítulo deriva la política monetaria óptima en este contexto. El tercer capitulo identifica la política monetaria óptima en una unión monetaria, cuando los gobiernos eligen el gasto público bajo discreción.

L'objectiu d'aquesta tesi és analitzar com s'han de concebre les polítiques fiscals i monetàries en un context en què els polítics tenen problemes de credibilitat. Es desenvolupen metodologies i aplicacions per mostrar com diferents graus de credibilitat de les institucions polítiques afecten la determinació d'impostos, deute públic, instruments monetaris i, en general, els resultats econòmics.

En el primer capítol - Loose commitment (Compromís Dèbil) -, s'introdueix una nova metodologia per resoldre problemes de política òptima tenint en compte que els polítics podrien no complir les seves promeses, i analitza els efectes de la credibilitat sobre la imposició sobre el capital i sobre el treball. El segon capítol - Political Disagreement Lack of Commitment and the Level of Debt (Desacord Polític, Falta de Compromís i el Nivell de Deute) - considera un cas en què la credibilitat es limitada per el fet d'haver-hi alternança entre polítics amb objectius diferents. En particular, es mostra com l'alternança política i la falta de compromís afecten el nivell de deute públic. Finalment, el tercer capítol - The Macroeconomic Effects of Unstable Monetary Policy Objectives (Els Efectes Macroeconòmics de la Inestabilitat dels Objectius de Política Monetària) - analitza com la possibilitat de canvis en els objectius influeixen en les decisions de política monetària.
El objetivo de esta tesis es analizar cómo se deben concebir las políticas fiscales y monetarias en un contexto en que los políticos tienen problemas de credibilidad. Se desarrollan metodologías y aplicaciones para mostrar cómo diferentes grados de credibilidad de las instituciones políticas afectan la determinación de impuestos, deuda pública, instrumentos monetarios y, en general, los resultados económicos.

En el primer capítulo - Loose commitment (Compromiso Débil)-, se introduce una nueva metodología para resolver problemas de política óptima tomando en cuenta que los políticos podrían no cumplir con sus promesas, y analiza los efectos de la credibilidad sobre la imposición sobre el capital y el trabajo. El segundo capítulo - Political Disagreement Lack of Commitment and the Level of Debt (Desacuerdo Político, Falta de Compromiso y el Nivel de Deuda) - considera un caso en que la credibilidad está limitada por el hecho de que hay alternancia entre políticos con distintos objetivos. En particular, se muestra cómo la alternancia política y la falta de compromiso afectan el nivel de deuda pública. Por último, el tercer capítulo - The Macroeconomic Effects of Unstable Monetary Policy Objectives (Los Efectos Macroeconómicos de la Inestabilidad de los Objetivos de Política Monetaria) - analiza cómo la posibilidad de cambios en los objetivos influye en las decisiones de política monetaria.
The purpose of this thesis is to analyze how fiscal and monetary policies should be designed in a context where policymakers have credibility problems. Methodologies and applications are developed to show how different degrees of policymakers' credibility affect the determination of policy choices, such as taxes or monetary instruments, and more generally the economic outcomes.

The first chapter - Loose Commitment -, introduces a new methodology to solve optimal policy problems taking into account that policymakers may not fulfill their promises, and analyzes the effects of policymakers' commitment on capital and labor taxation. The second chapter - Political Disagreement, Lack of Commitment and the Level of Debt - considers a case where commitment is limited by the fact that policymakers with different objectives alternate in office. In particular, it is shown how lack of commitment and political turnover affect the level of public debt. Finally, the third chapter - The Macroeconomic Effects of Unstable Monetary Policy Objectives - analyzes how the possibility of changes in policy objectives influences monetary policy choices.

Thesis (Ph. D.) -- University of Maryland, College Park, 2004.
Thesis research directed by: Economics. Title from t.p. of PDF. Includes bibliographical references. Published by UMI Dissertation Services, Ann Arbor, Mich. Also available in paper.

In Chapter 1 I develop a simple model, that builds upon some previous work on financial innovation processes, to account for the main stylized facts observed during extreme hyperinflations. The modeling device used here helps to reconcile some conflicting views on the causes, development and end of a hyperinflation without departing from the rational expectations assumption. Specifically, it is shown that the effectiveness of a future orthodox reform to preclude the occurrence of a hyperinflation, either speculative or fundamental, is an endogenous outcome which depends on a wide array of policy choices (fiscal and monetary) and structural features of the economy. In Chapter 2 I examine the postulates of the Fiscal Theory of the Price Level (FTPL) under an interest rate peg. I show that the usual definition of a non-Ricardian plan involves a non-credible government policy commitment, thus confuting the interpretation of the FTPL as a policy-based equilibrium selection device. Then I identify the set of necessary conditions for the implementation of non-Ricardian fiscal plans that result in a unique equilibrium. A critical necessary condition for the credibility of a fiscalist plan is that the equilibrium level of seigniorage must be non-positive. I argue that the fiscalist stock-analogy is only meaningful, precisely, when money enters into the government constraint as a destination of funds, rather than as a source. In Chapter 3, I extend Buiter's (2001, 2002) criticism (non-Ricardian plans are generally non-implementable whenever the monetary authority sets a non-contingent sequence of money supplies) to an infinite horizon economy. In particular, it is shown that a fiscalist deflation involves the violation of a household's optimality condition and that the notion of a fiscally-induced speculative hyperinflation cannot be rationalized invoking a symmetry between the problem of pricing a potentially fiat non-convertible asset (like money) and that of pricing the stock of a private firm as advocated by the FTPL.

Doctor of Philosophy
Department of Economics
Steven P. Cassou
This dissertation consists of three essays on modeling the behavior of both fiscal and monetary policy by allowing for asymmetry in preferences of the policy authorities. Whether the responses of fiscal or monetary policy to the business cycle conditions are symmetric or asymmetric is still an unresolved question. The idea behind asymmetric behavior is that policy makers take stronger action during times of distress than during ordinary times. The following chapters investigate this question empirically using data for the United States and show that policy makers do behave asymmetrically. Chapter 1 investigates whether the asymmetric monetary policy preferences for the output gap as shown in Surico (2007) disappeared during the post-Volcker period spanning 1982:04- 2003:02. The results show Surico’s conclusion to be fragile as moving the starting period for the estimation a few quarters forward shows strong asymmetric policy behavior. Chapter 2 investigates U.S. fiscal policy sustainability and cyclicality in empirical structures that allow fiscal policy responses to exhibit asymmetric behavior. Two quarterly intervals of data are investigated, both of which begin in 1955. The short sample was chosen for comparison to Bohn (1998), while the full sample uses all available data. The results for a short sample that ends in the second quarter of 1995 show some differences from the results for the full sample that includes the financial crisis and the Great Recession. For the full sample, U.S. fiscal policy is asymmetrical in regard to both sustainability and cyclicality. Regarding fiscal policy sustainability, the best fitting models show evidence of fiscal policy sustainability for the short sample. However, the fiscal sustainability question does become less clear for the full sample. Regarding fiscal policy cyclicality, we find during times of distress, policy is strongly countercyclical, but during good times the results are mixed. Chapter 3 investigates the source of asymmetry in reaction of U.S. fiscal policy to business cycle conditions, as shown in chapter 2. By decomposing the fiscal policy variable into the tax revenues and the expenditures, we show that both series exhibit asymmetry in a way which is analogous to the results found in chapter 2.

The subject of this dissertation is fiscal policy in the United States. In recent years the limitations of monetary policy have become more evident, generating greater interest in the use of fiscal policy as a stabilization tool. Despite considerable advances in the fiscal policy literature, many important questions about the effects and implementation of such policy remain unresolved. This motivates the present work, which explores both topics in the chapters that follow. I begin in the second chapter by estimating Federal Reserve responses to changes in taxes and spending. Monetary responses are a critical determinant of fiscal policy effectiveness since central banks have the ability to offset many of the economic changes resulting from fiscal shocks. Using techniques commonly employed in the fiscal multiplier literature, my results indicate a willingness by monetary policymakers to alter policy directly in response to fiscal shocks in a way that either reinforces or counteracts the resulting effects. In the third and fourth chapters I shift my focus to the conduct of fiscal policy. Specifically, I use Bayesian methods to estimate the response of federal discretionary policy to different macroeconomic variables. I allow for uncertainty about various characteristics of the underlying model which enables me to determine, for example, which variables matter to policymakers; whether policy conduct has changed over time; and whether policy responses are state dependent. My results indicate, among other things, that policy responds countercyclically to changes in the labor market, but only during periods of weak economic activity.

Mestrado em Economia Monetária e Financeira
This paper assesses the possible contribution of monetary expansions for the existence of expansionary fiscal consolidations, using annual panel data for 14 European Union countries over the period 1970-2019. The paper adopts a two-fold approach: it combines the usual CAPB approach used to identify fiscal consolidations with the narrative approach, and extends this approach to include dummy variables for identifying monetary expansions. A fiscal consolidation couple with a monetary expansion does produce little evidence of non-Keynesian effects, thus, monetary expansions does not contribute for the existence of expansionary fiscal consolidations. Moreover, Panel Probit estimations suggest monetary developments even contribute negatively for success of fiscal consolidations. For other success variables, duration and size contribute in a positive way and expenditure based consolidations lead to a decrease in debt to GDP ratio.
info:eu-repo/semantics/publishedVersion

This thesis consists of three essays on the discretionary interactions of fiscal and monetary policy authorities when they stabilise a single economy against shocks in the dynamic setting. In the first essay, I investigate the stabilization bias that arises in a model of noncooperative monetary and fiscal policy stabilisation of the economy, when the monetary authority implements price level targeting but fiscal authority remains benevolent. I demonstrate that the gain in welfare depends on the level of steady state debt. If the steady state level of the government debt is relatively low, then the monetary price level targeting unambiguously leads to social welfare gains, even if the fiscal authority acts strategically and faces different objectives and has incentives to pursue its own benefit and therefore may offset some or all of monetary policy actions. Moreover, if the fiscal policymaker is able to conduct itself as an intra-period leader then the social welfare gain of the monetary price level targeting regime can be further improved. However, if the economy has a relatively high steady state debt level, the gain of the price level targeting is outweighed by the loss arising from the conflicts between the policy makers, and such policy leads to a lower social welfare than under the cooperative discretionary inflation targeting. In the second essay I study the macroeconomic effect of the interaction between discretionary monetary policy which re-optimises every period and discretionary fiscal policy which reoptimises less frequently. I demonstrate the existence of two discretionary equilibria if the frequency of fiscal policy re-optimizes annually while monetary policy adjusts quarterly. Following a disturbance to the debt level, the economy can be stabilised either in a ‘fast but volatile‘ or ‘slow but smooth’ way, where both dynamic paths satisfy the conditions of optimality and time-consistency. I study several delegation regimes and demonstrate that the policy of partial targeting the debt level results in far worse welfare outcomes relative to a strict inflation targeting policy. In the third essay, I extend the framework developed in the second essay to the case with Blanchard-Yaari type of consumers. This brings in two effects. First, an increase in debt results in higher consumption via the wealth effect, the marginal cost is higher so the need for higher interest rate and higher taxation will increase, therefore the dynamic complementarity between actions of the two policymakers become stronger. Second, higher inflation affects consumption via the average propensity to consume and this effect is likely to weaken the dynamic complementarity. I show that when the households are assigned a mortality rate, overall the first effect dominates the second. The transition paths of the economic variables back to the steady state will be more volatile and the multiple equilibriums are more likely to arise.

COORDENAÇÃO DE APERFEIÇOAMENTO DO PESSOAL DE ENSINO SUPERIOR
O trabalho consiste no desenvolvimento de um modelo para avaliação de bem-estar de política monetária numa economia onde o governo enfrenta alguma restrição à liberdade de financiamento da dívida pública. O governo, no modelo, é capaz de se financiar através da emissão de títulos da dívida e de duas formas de taxação: lump sum e distorciva. A hipótese adotada no trabalho é que o governo não poderá estabelecer um nível constante de taxação distorciva ao longo do tempo, e deixar que o estoque da dívida ou da taxação não distorciva se ajustem em resposta aos choques. Ao contrário, o governo será forçado a alterar a taxação distociva corrente em resposta às variações do serviço da dívida. A partir do modelo, são feitas as considerações sobre o comportamento ótimo da autoridade monetária, no sentido do estabelecimento de uma regra ótima de política monetária.
The dissertation consists in the development of a model to evaluate the welfare effects of monetary policy in an economy where the government faces some restriction to debt financing. The government, in the model, is able to finance its expenditures by issuing public debt or levying two kinds of taxation: lump sum and distortionary taxes. The hypothesis adopted here is that the government cannot set a constant rate of distortionary taxation over time, and let either the debt stock or the lump sum taxation to adjust in response to shocks. Instead, the government will be forced to adjust the current distortionary taxation in response to variations of the debt service. The conclusion is that the optimal monetary policy rule that results from this model is quite different from the optimal rule in the absence of restrictions to debt financing.

I develop a two-country dynamic stochastic general equilibrium model of the European Union (EU) and use this model throughout the chapters of my dissertation. The model incorporates some realistic features of the European Union members. I calibrate the model and it matches the dvnamics of the data well. In the first chapter I study the need for fiscal policy cooperation between the new EU members (a small country) and the European Economic and Monetary Union (EMU) (a large country). I find that both countries are better off when they do not cooperate their fiscal policies. This result depends on the assumption about the presence of foreign ownership in the smaller country. When there is no foreign ownership in the smaller country, the large economy is indifferent between cooperating and not cooperating but the smaller country still prefers not to cooperate its fiscal policy with the EMU. The new EU members are expected to join the monetary union. In the second chapter I analyze the welfare consequences of different monetary arrangements for the new EU members and investigate whether their participation in the EMU is welfare-improving. Based on households' utility the results show that a flexible exchange rate regime is preferred to a monetary union and a monetary union is preferred to a fixed exchange rate regime. In the third chapter I investigate whether there are welfare gains from fiscal policy cooperation in the EMU. I assume that the EMU consists of countries that are currently its members as well as the countries that will join the EMU in the near future. I find that the incumbent EMU members are better off under fiscal policy cooperation and the new members are as well of under fiscal cooperation as they are in a non-cooperative equilibrium. Under fiscal policy cooperation in my model, all policymakers have the same objective by construction. Therefore, the results in my study differ from some previous findings in the literature
Thesis (PhD) — Boston College, 2005
Submitted to: Boston College. Graduate School of Arts and Sciences
Discipline: Economics

This thesis contains four essays, which studies the macroeconomic effects of fiscal and monetary policy quantitatively. The first essay investigates whether Swedish postwar business cycles have been generated by domestic or foreign shocks and finds that they are about equally important. In the second essay, the effects of government budget deficits on interest rates in Sweden are studied in a small open economy framework. The empirical results, which have high power due to very large swings in deficits and interest rates, provide support that larger deficits produce higher interest rates and thus give support against the ricardian view. The third essay seeks to identify optimal social insurance and redistribution levels in Sweden and the U.S. with respect to temporary and permanent idiosyncratic productivity risks. The results indicate that Sweden should reduce the social security level while the U.S. should approximately maintain the current level. In the last essay, the small sample properties of a well-known statistical test for the Lucas critique - the super exogeneity test - is studied in a general equilibrium environment. The results indicate that the super exogeneity test do not have sufficient power in small samples.
Diss. Stockholm : Handelshögsk.

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Conselho Nacional de Desenvolvimento Científico e Tecnológico
Este trabalho estuda as interações entre as políticas monetária e fiscal numa abordagem de teoria dos jogos. A coordenação entre essas duas políticas é essencial, uma vez que certas decisões tomadas por uma instituição podem ter efeitos desastrosos sobre a outra instituição, resultando em perda de bem estar social. Nesse sentido, foram derivadas as políticas monetária e fiscal ótimas em três contextos de coordenação ou formas de interação: quando as duas instituições minimizam sua perda apenas levando em conta seus objetivos, essa solução é conhecida como solução de Nash; quando uma instituição escolhe primeiro como proceder e a outra segue, num mecanismo conhecido como solução de Stackelberg; quando as instituições se comportam de forma cooperativa, buscando objetivos em comum. No caso brasileiro, as simulações dos modelos derivados nesses regimes de coordenação apontam uma perda mínima quando há uma solução de Stackelberg, mais especificamente quando a política monetária é a líder. Esse resultado é corroborado por outros tralhados

The research looks at the design of fiscal and monetary policy in EMU. The characteristics of the "economic constitution" established in the Maastricht treaty are analysed to test their robustness to different hypothesis about fiscal sustainability and fiscal and monetary policy interaction. Chapter two illustrates how the possibility of default of public debt in one large member country creates interdependence among fiscal positions of all member countries. Chapter three and four show that a similar kind of interdependence between national fiscal position could be determined by the effect that un-funded fiscal expansions have on the level of prices. The theoretical argument, borrowed from the so called Fiscal Theory of Price Determination, is developed both in a closed economy, to illustrate the basic mechanism and its interpretation, and in a two country monetary union model. Chapter five analyses, in a game theoretical framework, how the interdependence between policy instruments should be recognised in full, in order for any policy to be effective. In a situation in which a possible conflict of objectives or preferences between policy makers is present, any institutional arrangements which does not deal with it positively is intrinsically inefficient and can result in the policies cancelling each other out. The last chapter develops an example on how the conflict between policy institutions can be endogenous to an institutional structure chosen to reduce the influence of policy uncertainty on the economy. It is therefore a note of caution about the common belief that is possible with simple institutional solutions to overcome differences in preferences or objectives that are characteristic of the European environment. The analysis suggests that both greater fiscal policies cooperation and decentralisation of policy institutions from national to regional are developments necessary to achieve the policy goals of the Monetary Union.

The general objective of the doctoral thesis is to evaluate the effects of macroeconomic policies on the economy and the environment. Chapter 2 examines the composition of fiscal policy and its transmission mechanisms on various macroeconomic aggregates in open economies. Chapter 3 examines the transmission mechanisms of conventional and unconventional monetary policies on the macroeconomic aggregates in open economies. Chapter 4 explores the interactions among macroeconomic policies, the energy market and environmental quality. The analysis of the effects of fiscal and monetary policies on the economy and the environment is conducted using the structural vector autoregressive (VAR) methodology. This procedure is suitable when the variables of interest are endogenous, which is typically the case with macroeconomic and environmental variables. Structural VAR models allow to examine the dynamic interactions among the variables and feedback effects, through the impulse response functions and the variance decomposition. Chapter 2 provides a detailed examination on the composition of fiscal policy and its transmission mechanisms on various macroeconomic aggregates for two Anglo-Saxon countries, the United States and the United Kingdom, over the period 1964-2017. While research on fiscal policy has been substantial, the study of the transmission mechanisms and effects of tax revenue and government spending components in an open economy framework has received less attention. This chapter contributes to the literature on the disaggregated analysis of fiscal policy in open economies. We examine the composition of fiscal policy by asking whether government spending disaggregation matters for the transmission of fiscal policy on the macroeconomic aggregates. In addition, the chapter explores the role of the exchange rate and the trade balance in the transmission of shocks to tax revenue and government spending components. We estimate the effects of disaggregated fiscal policy shocks on the macroeconomic aggregates. Using the recursive approach, we identify a tax revenue and a government spending component shock that rotates between (i) government non-wage consumption (ii) government wage consumption (iii) public investment. The conducted analysis reveals that the disaggregation of fiscal policy matters since each fiscal instrument implies different transmission channels and effects on the real economy. It therefore seems essential to disaggregate government spending into its main components to uncover significant and different patterns that an aggregated analysis cannot reveal. However, as expected, the effects of government spending components on certain economic variables are weak and insignificant. In addition, our findings suggest that fiscal policy can be operative, besides the interest rate channel, via an exchange rate and trade balance channels. Considering an open economy framework is therefore essential since a part of the fiscal stimulus propagates abroad through external channels. The results occurring from this chapter have several policy implications. First, government non-wage consumption increases could have contractionary effects on the real economy as observed in the countries and the period considered in our analysis. Our findings also indicate that, as expected, public wage policies have a greater impact on the labor market than changes in the other components of government spending, while they have a relatively small effect on the output. Moreover, government efforts to stimulate the real economy through the increase in public investment should be accompanied by other types of macroeconomic policy instruments in order to offset the crowding out effect on private activity. Besides, the examination of tax revenue reveals different implications. In the United States, tax revenue cuts can stimulate economic activity and increase prices in the short run. In contrast, tax revenue cuts do not seem to be effective in stimulating the United Kingdom economy. Chapter 3 examines the transmission mechanisms of conventional and unconventional monetary policies on the macroeconomic aggregates in open economies. While research on monetary policy has been substantial, less attention was given to the study of the role of stock prices and consumer expectations in the transmission of monetary policy. In addition, very few studies have analysed the effects of monetary policy in open economies outside the euro area. Taking this into account, the analysis is carried out for two non-EMU countries, Switzerland and the United Kingdom, over the period 1990-2017. First, we examine whether conventional monetary policy is operative, besides other well-known channels, via a stock price and consumer confidence channels. We then explore the role of long-term interest rates, exchange rates and stock prices in the transmission of unconventional monetary policy. The chapter proposes two distinct structural VAR models based on a novel specification. The baseline model for the case of conventional monetary policy covers the pre-2009 period and is estimated using quarterly data, while the baseline model for the case of unconventional monetary policy covers the post-2009 period and is estimated using monthly data. The official bank policy rate and central bank’s reserve assets are used as instruments for conventional and unconventional monetary policy. Considering stock prices is of key importance since monetary policy decisions have an impact on financing conditions and market expectations, thus leading to adjustments of asset prices. If central banks are forward looking, the monetary policy instrument cannot be properly identified unless expectations are taken into account. Our modelling approach consists in augmenting the structural VAR model with a forward-looking informational variable of near-term development in economic activity and several foreign exogenous variables to control for international spillovers. For the case of conventional monetary policy, the consumer confidence indicator is used since it contains important information used by central banks about consumer expectations as regards future economic conditions. For the case of unconventional monetary policy, the long-term government bond yields are used to capture consumer expectations about future short-term interest rates. The conducted analysis reveals that the inclusion of a forward-looking informational variable of near-term development in economic activity and a financial variable such as the stock prices are of key importance for the monetary policy assessment. We provide evidence for the existence of a consumer confidence channel in the transmission mechanism of conventional monetary policy. An expansionary policy enhances households’ perception with regards future economic conditions, which may result in a tendency to consumer more and save less. Thus, changes in consumer confidence can potentially amplify the effects of monetary policy on the real economy. Moreover, the results indicate that the long-term government bond yields have an important role in the transmission mechanism of unconventional monetary policy. Although these results have limited policy implications, they reveal the importance of considering these specific transmission channels and controlling for global supply and demand shocks in order to provide a comprehensive analysis of the effects of monetary policy. Overall, our findings indicate that conventional and unconventional monetary policies were effective in providing temporary stimulus to the economies of Switzerland and the United Kingdom during the considered periods. Chapter 4 examines the interactions among macroeconomic policies, the energy market and environmental quality. These interactions and channels among them are studied through structural VAR models based on a macroeconomic framework including the energy market. This chapter builds on the growing literature analysing the links between macroeconomic policies and environmental variables. It examines for the first time how the implementation of macroeconomic policies, that aim to stimulate the economy, may also affect the quality of the environment along the business cycle and the specific role of energy markets as transmission channels. On the one hand, the chapter evaluates the implications of macroeconomic policies on the price of non-renewable energy and the use of both renewable and non-renewable energy. On the other hand, it assesses the influence of fiscal policy components, conventional and unconventional monetary policies on greenhouse gas emissions generated by the energy sector. The empirical analysis is conducted for Switzerland and the United Kingdom over the period 1990-2016. The geographical and physical characteristics of these two countries make them particularly vulnerable to global warming. For the case of monetary policy, the analysis is explicitly made on sub-periods since the implementation of quantitative easing can be viewed as a new monetary policy regime. The results occurring from Chapter 4 reveals several policy implications. Fiscal policy, besides its primary role in stabilizing economic activity, can contribute to the achievement of environmental sustainability. Our findings indicate that public investment is more efficient than government consumption in reducing non-renewable energy consumption and greenhouse gas emissions. The analysis of the composition of government spending seems crucial to establish how the different spending categories can complement the efforts to conserve natural resources, promote the use of clean energy and enhance environmental quality. On the other hand, the examination of monetary policy reveals that central banks should investigate the impact of their interventions on environmental quality through the renewable and non-renewable energy markets. In the United Kingdom, conventional monetary policy proves to be effective in promoting the deployment of renewable energies and reducing emissions. In Switzerland, central bank’s efforts to stimulate the real economy through the decrease in interest rates should be accompanied by more strict environmental regulations in order to offset the rise in emissions. Moreover, the conducted analysis reveals that unconventional monetary policy can lead to enhancements of environmental quality. However, as expected, quantitative easing is not by itself capable of substantially reducing emissions and other types of environmental policies need to be implemented jointly. Although monetary policy cannot yet be considered as a policy instrument for climate change and energy, central banks should incorporate environmental issues in their welfare maximization problem.

En esta tesis estudio varias cuestiones de política monetaria y fiscal usando modelos de equilibrio generales completamente micro-fundados. El primer capítulo de esta tesis trata la cuestión de cómo la políticas monetarias y fiscales se deben conducir en una unión monetaria donde hay un solo banco central que fija el tipo de interés común mientras que el gobierno todavía conserva independencia completa en las decisiones de políticas fiscales. En el segundo capítulo se dedica a estudiar si es posible racionalizar en un modelo keynesiano completamente micro-fundado la existencia de una unión monetaria. El último capítulo investiga en qué medida el incentivo de las autoridades de política económica en una economía abierta de mejorar los términos de intercambio en su favor se puede compensar por la externalidad de relocalización de la producción (home market effect).
In this thesis I study different kinds of monetary and fiscal policy issues by using fully microfounded general equilibrium models. The first chapter addresses the question of how monetary and fiscal policy should be conducted in a monetary union where there is a single central bank that sets the common interest rate while governments still retain full independence in fiscal policy decisions. The second chapter is devoted to study whether it is possible to rationalize, within a fully microfounded New Keynesian framework, the existence of a monetary union. The last chapter investigates to what extent the incentive of open economy policy makers to improve the terms of trade in their favour can be outweighed by the production relocation externality (the so called home market effect).

This thesis studies the relative roles of monetary and fiscal policies to achieve the basic macroeconomic objectives of stable prices with sustainable growth in Pakistan. Using data from December 1981 till June 2008, the changes in the monetary policy stance are shown to be capable of affecting the domestic price level and output growth. This thesis also tests the fiscal theory of price determination using quarterly data for the sample period 1977q1-2009q4, by investigating the relationship between the fiscal deficit, debt accumulation and inflation dynamics. The estimates reveal that there exists a fiscal dominant regime for most of the sample period since the fiscal authority is insensitive to monetary policy in the sense that neither taxes nor expenditure react (now or in the future) to the changes in the stock of outstanding government debt. It is also found that changes in the primary deficit exert an effect on aggregate demand which is also evidence of an active fiscal policy regime. This study also explores the indirect channels of fiscal regime by including a monetary, real sector, exchange rate and the consolidated budget deficit variables in three different specifications of vector error correction models and finds the monetary and fiscal variables as the key determinants of inflation in Pakistan. It also suggests a positive and significant relationship between the budget deficit and seigniorage revenues, confirming the monetisation of the fiscal deficit and indirect evidence of the fiscal dominance in the economy. In addition, this thesis employs a SVAR specification of exogenous fiscal policy shocks to observe the relative effectiveness of fiscal multipliers and finds their significant role to affect inflation and output in the economy. Finally this study develops and estimates a small macro-econometric model and then it is used to assess the relative performance of the monetary and fiscal policies in Pakistan. Policy simulations suggest that if Pakistan follows a rule based regime then macroeconomic stability can be improved in terms of the stability of output and inflation.

Mestrado em Economia Monetária e Financeira
Este estudo oferece uma análise empírica sobre o impacto da comunicação de política económica conduzida pelo BCE e a Comissão Europeia no mercado de títulos de divida soberana. Com este objetivo, foram recolhidas noticias relacionadas com a política monetária e orçamental desde do início do Euro até 2013. Os resultados do estudo mostram que os spreads dos títulos de divida soberana refletem três tipos de risco, risco de crédito através da atividade económica e competitividade, risco de liquidez e risco internacional. Os eventos de política monetária têm um papel relevante no mercado de títulos de divida soberana e parecem ser antecipados. Por outro lado, os eventos de política orçamental relacionados com os "braços" do PEC não têm um papel fundamental neste mercado.
This study provides an empirical analysis on how the communication of economic policy conducted by the ECB and the European Commission affects the European bond market. For this purpose, it was collected a set of periodic news from the beginning of the Euro until 2013, related with the monetary and fiscal policy events. The results of the study show that sovereign spreads reflect three sources of risk, credit risk through economic activity and competiveness, liquidity risk and international risk. The monetary events play a role in the bond market and they seem to be anticipated. On the other hand, fiscal policy events related with the "arms" of the SGP do not have a key role in this context.

This thesis is comprised of six Chapters on US Conventional and Unconventional Monetary Policy and their interaction with fiscal policy, both domestically and internationally. Chapter 1 introduces the main themes of the thesis. Chapter 2 studies the theoretical background of the thesis. After setting out key themes and the theoretical background in the introductory Chapters, the first core Chapter, i.e. thesis Chapter 3, examines the interaction between fiscal and monetary policy. Price puzzles are a repeated feature of empirical VAR models studying the effect of monetary policy. These price puzzles are often believed to appear due to the lack of information. However, we show that whether monetary and fiscal policy are active or passive influences the appearance of the price puzzle. This is because an active fiscal policy and a passive monetary policy can encourage private expenditure through a positive wealth channel. An active fiscal policy means fiscal authorities set expenditure regardless of tax revenues, while a passive monetary policy refers to a weak response of the policy interest rate to inflation. Finally, we find evidence in this Chapter that fiscal policy stimulates economic activity, i.e. it is non-Ricardian. Chapter 4 examines the effect of monetary and fiscal policy interactions in an international context. In particular, it considers the international spillovers of US monetary policy, whilst account for fiscal policy. This Chapter shows that US government debt influences the duration of the responses to a monetary contraction. Furthermore, it is shown that an increase in US government debt influences both the short and long-term interest rates, inflation, and output in the Euro Area and UK. This is through a positive wealth effect. In addition, the results of Persistence Profiles test, i.e. how fast we converge upon equilibrium following a shock, suggest that accounting for US government debt delays the return to equilibrium following monetary policy shocks. This may be due to the impact of fiscal policy on inflation and its persistence. Chapter 5 studies Unconventional Monetary Policy (UMP). It is shown that UMP increases output and inflation in the US, and generates spillovers to the Euro Area and UK. Furthermore, we present evidence that the portfolio balance is the transmission channel of UMP. That is UMP contributes to lowering the bound yields while it increases the price of assets. Chapter 6 concludes and summarizes the thesis, and provides a discussion of policy implications.

This thesis consists of four self-contained essays on policy rules and macroeconomic behaviour of an emerging market economy, in addition to the introductory first chapter. It examines monetary and fiscal policy performance, develops a small open-economy dynamic stochastic general equilibrium (DSGE) model and investigates welfare-maximising optimal monetary rules, with reference to the Sri Lankan economy. The second chapter empirically characterises the monetary policy of Sri Lanka using alternative policy reaction functions. The estimation results suggest that the Taylor rule captures the monetary policy reaction characteristics in Sri Lanka more closely than the McCallum rule. The results further implies that the Central Bank of Sri Lanka (CBSL) follows a contemporaneous or backward-looking rule instead of a forward-looking monetary policy rule. The results indicate that the CBSL responds to inflation fairly strongly while stabilising output aggressively. It is also found that the CBSL smoothes out policy action strongly. This suggests that the CBSL implements policy gradually in small steps in the desired direction, without making immediate sharp changes. The third chapter investigates the fiscal policy performance of Sri Lanka in the period subsequent to the implementation of numerical fiscal targets in 2003. It estimates alternative fiscal policy rules widely used in literature including tax difference rules, primary balance rules and Taylor-type fiscal rules for Sri Lanka. I find that the fiscal authority contemporaneously responds to changes in output gap and government expenditure moderately, by changing the tax rate. Moreover, it implies that the fiscal policy in Sri Lanka is procyclical rather than countercyclical. The fourth chapter develops a New Keynesian (NK) small open-economy (SOE) dynamic stochastic general equilibrium (DSGE) model. This study is different from most of the other available SOE studies, as it includes an explicit fiscal sector in the model. The model is estimated for Sri Lanka using Bayesian techniques. The dynamics of the model in response to different shocks are examined to understand the relative importance of the business cycle drivers. The properties of the estimated rules are analysed to identify the policy reaction behaviour of the monetary and fiscal authorities. The estimation results suggest that over the sample period, the CBSL conducted moderately strong anti-inflationary monetary policy while paying substantial attention to output stabilisation, however, with negligibly small concerns for exchange rate movements. The findings suggest a high degree of interest rate persistence as well. The findings further imply that the fiscal authority of Sri Lanka changes its policy instrument, the tax rate, only moderately in response to changes in debt level, government expenditure or output. The fifth chapter computes welfare-maximising optimal monetary policy rules for Sri Lanka based on a slightly simplified variant of the DSGE model discussed in the fourth chapter. I calculate second-order accurate solutions to the model, which facilitate welfare computation across various policy rules. I determine optimal monetary policy rules such that the welfare associated with them is as close as possible to the Ramsey optimal allocation. The welfare cost of adopting alternative rules, instead of the optimal, is determined to evaluate the relative importance of the different policy rules. There are several key findings. First, the optimal monetary policy rule suggests an aggressive response to inflation and a moderate response to output-gap. Second, the optimal policy advocates a muted response to exchange rate fluctuations. Third, the welfare gains from interest rate smoothing are significant. Finally, the welfare losses associated with the current realised monetary policy rule for Sri Lanka can be mitigated significantly by responding to inflation more strongly. Finally, the sixth chapter summarises the key findings and concludes the thesis.

This thesis consists of three essays in monetary economics and international macroeconomics.
Chapter one uses Canadian data to evaluate the performance of money growth targeting and inflation targeting policy rules, especially when they react to asset price changes. There are three important findings. First, estimates of the policy rules consistent with both regimes provide evidence that the Bank of Canada has systematically reacted to stock price bubbles and exchange rate changes. Second, a counterfactual experiment reveals that, the high inflation of the 1970s and early 1980s could have been avoided if the Bank of Canada had responded more strongly to inflation and growth in aggregate demand. Third, simulation experiments yielded two important results: For both the money growth targeting and inflation targeting policy rules, it is always desirable to react to changes in exchange rates and stock price bubbles: Contrary to established findings, the results indicate that the money growth targeting policy rules are more efficient than the inflation targeting policy rules.
Chapter two uses data on Ghana to test the validity of the intertemporal model of current account that allows for external shocks in the form of variable interest rates and exchange rates, and the existence of capital controls. We find that, irrespective of the degree of capital control, the basic model fails to predict the dynamics of the actual current account. However, we find that extending the model to capture variations in interest rates and exchange rates better explains the path of the actual current account balances only during the liberalized regime. When the model was adjusted to allow for credit constraints, there was some support for the proposition that the presence of capital controls prevented economic agents in Ghana to smooth their consumption path during the control regime.
Chapter three investigates the effect of trading block on Tanzania's bilateral trade. Using a fixed effects estimation technique, the results revealed that the East African Community (EAC) and the European Union (EU) have had significant positive effects on Tanzania's bilateral trade. We also find that there is a significant intra-trade relationship between Tanzania and its major trading partners in the manufacturing sector.

This paper investigates a simultaneous impact of monetary and fiscal policies on economic growth in a single model. The data for 21 OECD countries covering the period 1970-2009 is gathered for our study of policy effect on economic growth. A quadratic specification method is employed by constructing a relationship between economic growth and several policy variables in order to find optimal values for government debt level, tax revenues and interest rate that lead to the highest economic growth, which is a contribution of this paper. Furthermore, a threshold method is exploited to determine the highest growth rate at different tax and interest rates given a particular debt level. Another distinctive feature of this research is uttered in simultaneous application of both a quadratic specification method and a threshold method in the same paper which has never been done before. Having analysed methodological problems of previous studies, we employ a state-of-art advanced estimation technique which ensures a robustness of stated conclusions. According to the results, the highest economic growth performance is achieved when total tax revenue reach 23.75% of GDP and when a government debt level does not exceed 41% of GDP.

L’objectif de cette thèse est double. Premièrement, nous analysons l’interaction entre politique monétaire et fiscale dans un cadre non-Ricardien où la politique monétaire est contrainte par la positivité des taux d’intérêt nominaux. Deuxièmement, nous étudions les implications de la dette publique sur les agrégats macroéconomiques
The focus of this doctoral thesis is two fold. First, we analyze the interaction between monetary and fiscal policy in a non-Ricardian framework where monetary policy is constrained by the zero lower bound on nominal interest rates. Second, we investigate the implications of government debt on macroeconomic aggregates

Doctor of Philosophy
Department of Economics
Steven P. Cassou
This essay empirically investigates the dynamics between government debt and budget deficits in the United States during a recession as opposed to an expansion. We use four different budget deficits definitions to develop a more comprehensive insight. We estimate a threshold VAR model on quarterly data from 1947: Q1 to 2016: Q3 on debt to GDP and budget deficits to GDP ratio for the United States. Specification test using LR test rejects the null for a linear VAR against nonlinear VAR. The nonlinear impulse responses indicate, with an increase to budget deficits to GDP ratio, government debt to GDP ratio rise faster during a recession as opposed to an expansion, and tend to move in a counter-cyclical manner with an increase in the output gap. We can thus infer that governments chose economic stability over fiscal balance during recessions. With an increase in government debt to GDP ratio, nonlinear impulse response show budget deficits to GDP ratio grow faster during an expansion as opposed to a recession and exhibit counter-cyclicality with an increase in the output gap. All four budget defi cits definitions depict similar pattern. Robustness check, using cyclically adjusted primary budget deficit published by the congressional Budget Office, also con rm the above findings. In this essay, we explore the presence of a long run relationship between the monetary base and the government debt using monthly data from 1942:1 to 2015:12. We apply formal statistical methods including cointegration and threshold cointegration tests to investigate the presence of a long-run relationship and estimate a threshold vector error-correction model (TVECM henceforth) to analyze the short-run dynamics. We find the presence of a threshold cointegration between the monetary base and government debt. As for the short-run dynamics, TVECM estimates show that the speed of adjustment is significant for the growth in debt equation in both regimes with the signs indicating government adjusting the debt in the short-run. But the U.S. Fed does not change the monetary base, hence we do not find any evidence of debt monetization in the U.S. We evaluate our findings over two sub-samples: 1946 to 2015 and 1946 to 2007 for robustness purposes. Findings from both sub-samples conform to our findings from the full sample. In this essay, we investigate the impacts of growth in the budget deficit and money supply on real interest rate are integral to contemporary macroeconomic policy. We employ threshold VAR and nonlinear impulse responses using quarterly data from 1959 to 2015. We find that growth in money supply and budget deficits have an asymmetric impact on inflation, short-term interest rate, and real interest rates. Growth in money supply and budget deficit tend to make the real interest rate negative in a bad state. In a good state, on the other hand, growth in money supply tend to increase the real interest rate but growth in budget deficits tend to decrease the real interest rate over the forecast horizon.

要旨pdfファイル:学位記番号「経博第77号」
Kyoto University (京都大学)
0048
新制・課程博士
博士(経済学)
甲第7622号
経博第79号
新制||経||138(附属図書館)
UT51-99-G216
京都大学大学院経済学研究科現代経済学専攻
(主査)教授 吉田 和男, 教授 瀬地山 敏, 教授 古川 顕
学位規則第4条第1項該当

The active use of macroeconomic policies to smooth economic fluctuations and, as a

consequence, the stance that policymakers should adopt over the business cycle, remain

controversial issues in the economic literature.

In the light of the dramatic experience of the early 1930s’ Great Depression, Keynes (1936)

argued that the market mechanism could not be relied upon to spontaneously recover from

a slump, and advocated counter-cyclical public spending and monetary policy to stimulate

demand. Albeit the Keynesian doctrine had largely influenced policymaking during

the two decades following World War II, it began to be seriously challenged in several

directions since the start of the 1970s. The introduction of rational expectations within

macroeconomic models implied that aggregate demand management could not stabilize

the economy’s responses to shocks (see in particular Sargent and Wallace (1975)). According

to this view, in fact, rational agents foresee the effects of the implemented policies, and

wage and price expectations are revised upwards accordingly. Therefore, real wages and

money balances remain constant and so does output. Within such a conceptual framework,

only unexpected policy interventions would have some short-run effects upon the economy.

The "real business cycle (RBC) theory", pioneered by Kydland and Prescott (1982), offered

an alternative explanation on the nature of fluctuations in economic activity, viewed

as reflecting the efficient responses of optimizing agents to exogenous sources of fluctuations, outside the direct control of policymakers. The normative implication was that

there should be no role for economic policy activism: fiscal and monetary policy should be

acyclical. The latest generation of New Keynesian dynamic stochastic general equilibrium

(DSGE) models builds on rigorous foundations in intertemporal optimizing behavior by

consumers and firms inherited from the RBC literature, but incorporates some frictions

in the adjustment of nominal and real quantities in response to macroeconomic shocks

(see Woodford (2003)). In such a framework, not only policy "surprises" may have an

impact on the economic activity, but also the way policymakers "systematically" respond

to exogenous sources of fluctuation plays a fundamental role in affecting the economic

activity, thereby rekindling interest in the use of counter-cyclical stabilization policies to

fine tune the business cycle.

Yet, despite impressive advances in the economic theory and econometric techniques, there are no definitive answers on the systematic stance policymakers should follow, and on the

effects of macroeconomic policies upon the economy. Against this background, the present thesis attempts to inspect the interrelations between macroeconomic policies and the economic activity from novel angles. Three contributions

are proposed.

In the first Chapter, I show that relying on the information actually available to policymakers when budgetary decisions are taken is of fundamental importance for the assessment of the cyclical stance of governments. In the second, I explore whether the effectiveness of fiscal shocks in spurring the economic activity has declined since the beginning of the 1970s. In the third, the impact of systematic monetary policies over U.S. industrial sectors is investigated. In the existing literature, empirical assessments of the historical stance of policymakers over the economic cycle have been mainly drawn from the estimation of "reduced-form" policy reaction functions (see in particular Taylor (1993) and Galì and Perotti (2003)). Such rules typically relate a policy instrument (a reference short-term interest rate or an indicator of discretionary fiscal policy) to a set of explanatory variables (notably inflation, the output gap and the debt-GDP ratio, as long as fiscal policy is concerned). Although these policy rules can be seen as simple approximations of what derived from an explicit optimization problem solved by social planners (see Kollmann (2007)), they received considerable attention since they proved to track the behavior of central banks and fiscal

policymakers relatively well. Typically, revised data, i.e. observations available to the

econometrician when the study is carried out, are used in the estimation of such policy

reaction functions. However, data available in "real-time" to policymakers may end up

to be remarkably different from what it is observed ex-post. Orphanides (2001), in an

innovative and thought-provoking paper on the U.S. monetary policy, challenged the way

policy evaluation was conducted that far by showing that unrealistic assumptions about

the timeliness of data availability may yield misleading descriptions of historical policy.

In the spirit of Orphanides (2001), in the first Chapter of this thesis I reconsider how

the intentional cyclical stance of fiscal authorities should be assessed. Importantly, in

the framework of fiscal policy rules, not only variables such as potential output and the

output gap are subject to measurement errors, but also the main discretionary "operating

instrument" in the hands of governments: the structural budget balance, i.e. the headline

government balance net of the effects due to automatic stabilizers. In fact, the actual

realization of planned fiscal measures may depend on several factors (such as the growth

rate of GDP, the implementation lags that often follow the adoption of many policy

measures, and others more) outside the direct and full control of fiscal authorities. Hence,

there might be sizeable differences between discretionary fiscal measures as planned in the

past and what it is observed ex-post. To be noted, this does not apply to monetary policy

since central bankers can control their operating interest rates with great accuracy.

When the historical behavior of fiscal authorities is analyzed from a real-time perspective, it emerges that the intentional stance has been counter-cyclical, especially during expansions, in the main OECD countries throughout the last thirteen years. This is at

odds with findings based on revised data, generally pointing to pro-cyclicality (see for example Gavin and Perotti (1997)). It is shown that empirical correlations among revision

errors and other second-order moments allow to predict the size and the sign of the bias

incurred in estimating the intentional stance of the policy when revised data are (mistakenly)

used. It addition, formal tests, based on a refinement of Hansen (1999), do not reject

the hypothesis that the intentional reaction of fiscal policy to the cycle is characterized by

two regimes: one counter-cyclical, when output is above its potential level, and the other

acyclical, in the opposite case. On the contrary, the use of revised data does not allow to identify any threshold effect.

The second and third Chapters of this thesis are devoted to the exploration of the impact

of fiscal and monetary policies upon the economy.

Over the last years, two approaches have been mainly followed by practitioners for the

estimation of the effects of macroeconomic policies on the real activity. On the one hand,

calibrated and estimated DSGE models allow to trace out the economy’s responses to

policy disturbances within an analytical framework derived from solid microeconomic

foundations. On the other, vector autoregressive (VAR) models continue to be largely

used since they have proved to fit macro data particularly well, albeit they cannot fully

serve to inspect structural interrelations among economic variables.

Yet, the typical DSGE and VAR models are designed to handle a limited number of variables

and are not suitable to address economic questions potentially involving a large

amount of information. In a DSGE framework, in fact, identifying aggregate shocks and

their propagation mechanism under a plausible set of theoretical restrictions becomes a

thorny issue when many variables are considered. As for VARs, estimation problems may

arise when models are specified in a large number of indicators (although latest contributions suggest that large-scale Bayesian VARs perform surprisingly well in forecasting.

See in particular Banbura, Giannone and Reichlin (2007)). As a consequence, the growing

popularity of factor models as effective econometric tools allowing to summarize in

a parsimonious and flexible manner large amounts of information may be explained not

only by their usefulness in deriving business cycle indicators and forecasting (see for example

Reichlin (2002) and D’Agostino and Giannone (2006)), but also, due to recent

developments, by their ability in evaluating the response of economic systems to identified

structural shocks (see Giannone, Reichlin and Sala (2002) and Forni, Giannone, Lippi

and Reichlin (2007)). Parallelly, some attempts have been made to combine the rigor of

DSGE models and the tractability of VAR ones, with the advantages of factor analysis

(see Boivin and Giannoni (2006) and Bernanke, Boivin and Eliasz (2005)).

The second Chapter of this thesis, based on a joint work with Agnès Bénassy-Quéré, presents an original study combining factor and VAR analysis in an encompassing framework,

to investigate how "unexpected" and "unsystematic" variations in taxes and government

spending feed through the economy in the home country and abroad. The domestic

impact of fiscal shocks in Germany, the U.K. and the U.S. and cross-border fiscal spillovers

from Germany to seven European economies is analyzed. In addition, the time evolution of domestic and cross-border tax and spending multipliers is explored. In fact, the way fiscal policy impacts on domestic and foreign economies

depends on several factors, possibly changing over time. In particular, the presence of excess

capacity, accommodating monetary policy, distortionary taxation and liquidity constrained

consumers, plays a prominent role in affecting how fiscal policies stimulate the

economic activity in the home country. The impact on foreign output crucially depends

on the importance of trade links, on real exchange rates and, in a monetary union, on

the sensitiveness of foreign economies to the common interest rate. It is well documented

that the last thirty years have witnessed frequent changes in the economic environment.

For instance, in most OECD countries, the monetary policy stance became less accommodating

in the 1980s compared to the 1970s, and more accommodating again in the

late 1990s and early 2000s. Moreover, financial markets have been heavily deregulated.

Hence, fiscal policy might have lost (or gained) power as a stimulating tool in the hands

of policymakers. Importantly, the issue of cross-border transmission of fiscal policy decisions is of the utmost relevance in the framework of the European Monetary Union and this explains why the debate on fiscal policy coordination has received so much attention since the adoption

of the single currency (see Ahearne, Sapir and Véron (2006) and European Commission

(2006)). It is found that over the period 1971 to 2004 tax shocks have generally been more effective in spurring domestic output than government spending shocks. Interestingly, the inclusion of common factors representing global economic phenomena yields to smaller multipliers

reconciling, at least for the U.K. the evidence from large-scale macroeconomic models,

generally finding feeble multipliers (see e.g. European Commission’s QUEST model), with

the one from a prototypical structural VAR pointing to stronger effects of fiscal policy.

When the estimation is performed recursively over samples of seventeen years of data, it

emerges that GDP multipliers have dropped drastically from early 1990s on, especially

in Germany (tax shocks) and in the U.S. (both tax and government spending shocks).

Moreover, the conduct of fiscal policy seems to have become less erratic, as documented

by a lower variance of fiscal shocks over time, and this might contribute to explain why

business cycles have shown less volatility in the countries under examination.

Expansionary fiscal policies in Germany do not generally have beggar-thy-neighbor effects

on other European countries. In particular, our results suggest that tax multipliers have

been positive but vanishing for neighboring countries (France, Italy, the Netherlands, Belgium and Austria), weak and mostly not significant for more remote ones (the U.K.

and Spain). Cross-border government spending multipliers are found to be monotonically

weak for all the subsamples considered.

Overall these findings suggest that fiscal "surprises", in the form of unexpected reductions in taxation and expansions in government consumption and investment, have become progressively less successful in stimulating the economic activity at the domestic level, indicating that, in the framework of the European Monetary Union, policymakers can only marginally rely on this discretionary instrument as a substitute for national monetary policies.

The objective of the third chapter is to inspect the role of monetary policy in the U.S. business cycle. In particular, the effects of "systematic" monetary policies upon several industrial sectors is investigated. The focus is on the systematic, or endogenous, component of monetary policy (i.e. the one which is related to the economic activity in a stable and predictable way), for three main reasons. First, endogenous monetary policies are likely to have sizeable real effects, if agents’ expectations are not perfectly rational and if there are some nominal and real frictions in a market. Second, as widely documented, the variability of the monetary instrument and of the main macro variables is only marginally explained by monetary "shocks", defined as unexpected and exogenous variations in monetary conditions. Third, monetary shocks can be simply interpreted as measurement errors (see Christiano, Eichenbaum

and Evans (1998)). Hence, the systematic component of monetary policy is likely to have played a fundamental role in affecting business cycle fluctuations. The strategy to isolate the impact of systematic policies relies on a counterfactual experiment, within a (calibrated or estimated) macroeconomic model. As a first step, a macroeconomic shock to which monetary policy is likely to respond should be selected,

and its effects upon the economy simulated. Then, the impact of such shock should be

evaluated under a “policy-inactive” scenario, assuming that the central bank does not respond

to it. Finally, by comparing the responses of the variables of interest under these

two scenarios, some evidence on the sensitivity of the economic system to the endogenous

component of the policy can be drawn (see Bernanke, Gertler and Watson (1997)).

Such kind of exercise is first proposed within a stylized DSGE model, where the analytical

solution of the model can be derived. However, as argued, large-scale multi-sector DSGE

models can be solved only numerically, thus implying that the proposed experiment cannot

be carried out. Moreover, the estimation of DSGE models becomes a thorny issue when many variables are incorporated (see Canova and Sala (2007)). For these arguments, a less “structural”, but more tractable, approach is followed, where a minimal amount of

identifying restrictions is imposed. In particular, a factor model econometric approach

is adopted (see in particular Giannone, Reichlin and Sala (2002) and Forni, Giannone,

Lippi and Reichlin (2007)). In this framework, I develop a technique to perform the counterfactual experiment needed to assess the impact of systematic monetary policies.

It is found that 2 and 3-digit SIC U.S. industries are characterized by very heterogeneous degrees of sensitivity to the endogenous component of the policy. Notably, the industries showing the strongest sensitivities are the ones producing durable goods and metallic

materials. Non-durable good producers, food, textile and lumber producing industries are

the least affected. In addition, it is highlighted that industrial sectors adjusting prices relatively infrequently are the most "vulnerable" ones. In fact, firms in this group are likely to increase quantities, rather than prices, following a shock positively hitting the economy. Finally, it emerges that sectors characterized by a higher recourse to external sources to finance investments, and sectors investing relatively more in new plants and machineries, are the most affected by endogenous monetary actions.
Doctorat en sciences économiques, Orientation économie
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Mestrado em Economia Monetária e Financeira
Através da utilização de dados de painel para os países da UE, para o período compreendido entre 1995 e 2019, este trabalho pretende estudar a condução de política monetária, política fiscal e as interações entre as mesmas. O nosso objetivo passa por entender as diferenças que existem entre a zona do euro e os países que não pertencem à mesma, assim como o efeito da crise financeira sobre as mesmas. Os resultados alcançados mostram que a inflação é crucial para a determinação das taxas de juro e que as autoridades fiscais apresentam preocupação no que toca à saúde das finanças públicas. No que toca às interações entre estas duas políticas, há evidência de que a relação existente é de substituição, no entanto sem resposta da autoridade monetária à política fiscal. A crise financeira apresenta um impacto negativo sobre a taxas de juro nominais de curto prazo, assim como sobre o défice primário ajustado ao ciclo, no entanto com uma maior intensidade na zona euro.
Performing a panel data analysis for the EU countries, for the period between 1995 and 2019, this work studies the individual conduction of monetary and fiscal policies, so as the interactions among them. We aim to understand the differences that exist between the euro area and the non-euro area countries and how the financial crisis affects them. Results show that inflation is crucial for the determination of interest rates and fiscal authorities are concerned with the health of public finances. Concerning the interactions between these two policies, there is evidence that it is a relation of substitutability, however with no response of monetary authorities to fiscal policy. The financial crisis impacted negatively both the short-term nominal interest rates and the cyclically adjusted primary balance, however with a higher degree in the euro area.
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