Date: 2021
Type: Thesis
Essays in macroeconomics
Florence : European University Institute, 2021, EUI, ECO, PhD Thesis
TERESIŃSKI, Jan Karol, Essays in macroeconomics, Florence : European University Institute, 2021, EUI, ECO, PhD Thesis - https://hdl.handle.net/1814/71155
Retrieved from Cadmus, EUI Research Repository
In the first two chapters of this thesis we analyze the impact of an increase in transfer payments - i.e., fiscal stimulus in a form of direct payments to individuals - on budget deficits. In the first chapter we study this issue theoretically and show that in a model with the cash-in-advance constraint on consumption and downward nominal wage rigidity the transfers multiplier is positive when the economy is below its full employment level. Increasing transfers in these circumstances relaxes the cash-in-advance constraint and effectively undoes the inefficiency caused by the wage rigidity. Since this results in higher income and consumption which are both taxed, the fiscal stimulus can possibly be self-financing - it pays for itself in a form of increased tax revenue. We also perform a quantitative analysis and show that under a plausible calibration of the model when the economy is far enough from the full employment, the transfer multipliers are large enough for the tax revenue to increase sufficiently so that the fiscal stimulus largely finances itself. In the second chapter we analyze the self-financing nature of transfer payments empirically and estimate the impulse response functions of GDP, unemployment, consumption and debt to an increase in transfer payments on quarterly data from 1959Q2 to 1991Q4 using the local projection method and exogenous transfers shocks. We show that the stimulus in a form of higher transfers has more pronounced effects when unemployment is high than when it is low. Permanent transfers seem not to affect debt, while temporary transfers are estimated to reduce it after an initial increase, especially in the high unemployment regime - an increase in temporary transfers seems to be not only self-financing, but actually reducing debt when the economy recovers. The third chapter is related to a different topic: we analyze how the terms of trade (TOT) - the ratio of export prices to import prices - affect total factor productivity (TFP). We provide empirical macroeconomic evidence based on the times series SVAR analysis and microeconomic evidence based on industry level data which shows that the terms of trade improvements are associated with a slowdown in the total factor productivity growth. Next, we build a theoretical model in which terms of trade improvement results in putting more resources into physical goods production at the expense of the research and development (R&D) sector, which in turn has a negative impact on knowledge development.
Table of Contents:
-- Part 1 Self-financing transfers in a cash-in-advance economy with downward nominal wage rigidity -- 1.1 Introduction -- 1.2 Models -- 1.2.1 Benchmark model - competitive business cycle model with government -- 1.2.2 Downward rigid nominal wages -- 1.3 Policy implications -- 1.3.1 Multiplier -- 1.3.2 Laffer curve -- 1.3.3 Some pleasant fiscal algebra -- 1.3.4 Transfers ensuring full employment -- 1.3.5 Optimal Ramsey policy -- 1.3.6 Alternative fiscal policies -- 1.4 Quantitative analysis -- 1.4.1 Adding capital and capital taxes -- 1.4.2 Calibration -- 1.4.3 Experiments -- 1.4.4 Benchmark model -- 1.4.5 Downward rigid nominal wages -- 1.4.6 Downward rigid nominal wages with an increase in transfers -- 1.4.7 Quantitative results -- 1.4.8 Ramsey optimal policy -- 1.5 Conclusions -- 1.6 Appendix -- 1.6.1 Some pleasant fiscal algebra with capital -- 1.6.2 Results used in subsection 1.3.5 --1.6.3 Deriving the implementability constraint -- 2 What are the effects of higher transfer payments on debt? Are transfers self-financing? -- 2.1 Introduction -- 2.2 Data -- 2.3 Estimation methodology -- 2.4 Results -- 2.5 Conclusions -- 2.6 Appendix -- 2.6.1 Impulse response functions of transfers -- 2.6.2 Structural VAR analysis -- 3 Total factor productivity and the terms of trade -- 3.1 Introduction -- 3.2 Empirical evidence -- 3.2.1 Macroeconomic evidence -- 3.2.2 Microeconomic evidence -- 3.2.3 Evidence on the relationship between R&D and the terms of trade -- 3.3 Model -- 3.3.1 Households -- 3.3.2 Exportable goods producer -- 3.3.3 Technology producer -- 3.3.4 The main mechanism -- 3.3.5 Remaining elements of the model -- 3.4 Quantitative model evaluation -- 3.4.1 Functional forms -- 3.4.2 Calibration -- 3.4.3 Model responses -- 3.5 Conclusions -- 3.6 Appendix -- 3.6.1 Tables -- 3.6.2 Growth of the technology
Additional information:
Defence date: 03 May 2021; Examining Board: Professor Ramon Marimon (European University Institute); Professor Russell Cooper (European University Institute); Professor Stephanie Schmitt-Grohé (Columbia University); Professor Pedro Teles (Católica-Lisbon Business & Economics)
Cadmus permanent link: https://hdl.handle.net/1814/71155
Full-text via DOI: 10.2870/772702
Series/Number: EUI; ECO; PhD Thesis
Publisher: European University Institute
LC Subject Heading: Transfer payments; Macroeconomics; Money; Transfer payments; Macroeconomics; Money
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