Three Essays in Macroeconomics

Abstract

This thesis comprises three thorough investigations into different important economic issues. The common nexus between them is the long-horizon nature of the subjects covered, in which economic growth plays a central role. Specifically, the contents of the thesis address questions such as the extent to which financial integration is favorable for economic development, the implications that population growth has for the natural environment and the design of optimal policy when considering the latest insights on individuals' consumption behavior. The study of the specific topics addressed throughout each chapter of this thesis delivers a number of important results that are summarized subsequently. The first chapter provides an analysis of the relationship between aggregate economic uncertainty, growth and welfare. The model generates two main predictions. First, consumption growth is, ceteris paribus, higher on average in a country that participates in the international financial markets compared to one that is financially autarkic. Second, the sign of the net effect of financial integration on overall social welfare is ambiguous. In the second chapter, an inquiry is made into the implications of population growth for an optimal management problem with pollution externalities. The presence of a potential irreversibility in the dynamics for the stock of pollution is responsible for an outcome overlooked by the previous literature. In line with the available empirical evidence, the model implies that a growing population leads to a deteriorated state of environmental quality. Finally, the third chapter explores an optimal taxation problem in the presence of both congestion and habituation effects in consumption in an economy featuring endogenous growth. The results show that the second-best solution entails a constant consumption tax rate in the long-run and a counter-cyclical consumption tax growth rate in the short-run whose level hinges on the importance of both congestion and habit effects in preferences.