Three essays in macroeconomics

Abstract

The first chapter of this thesis (which represents joint work with Benedikt Kolb) quantifies the potentially different effects of monetary policy communication on macroeconomic variables, relative to monetary policy actions, using U.S. data. We employ a decomposition of high-frequency jumps in financial futures around meeting days of the FOMC, in the vein of Gürkaynak et al. (2005), but with an additional weighted averaging procedure to reduce noise and to allow the series to be entered into a simple hybrid VAR of the Romer and Romer (2004) type. We find that only the communication shocks deliver responses of Industrial Production consistent with theory. The second chapter of the thesis re-examines the argument of Asker et al. (2014), who suggest that recently developed measures of resource misallocation largely document the dynamic adjustment of firms in the presence of capital adjustment costs and idiosyncratic shocks to demand. The study extends the analysis of Asker et al. (2014) to the case of labour adjustment costs, and finds that such arguments are well able to deliver the levels of labour misallocation recorded using Italian firm-level data. The model struggles with the correlation between misallocation measures and firm-size. The model is then used to investigate a regulatory threshold, representing the first structural investigation of factor adjustment costs that explicitly incorporates features of the regulatory environment into estimation. The effects of regulatory reform for TFP are shown to be potentially quite large. The third chapter of the thesis evaluates whether the financial crisis of 2008 precipitated positive or negative changes in levels of misallocation, as would follow either from the “cleansing” or the “sullying” views of recessions respectively. The paper uses European data from 13 economies. Regression analysis is able to detect some evidence for cleansing redistributions of value-added and employment, for the manufacturing sample.