Essays in Macroeconomics

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The goal of this dissertation is to improve our understanding of the driving forces behind short-term movements in important aggregate variables such as exports, imports, the trade balance, output, investment, and employment. The first chapter contrasts the cyclical behavior of the trade balance and trade flows in a group of emerging and a group of developed economies. I find that: (i) unlike developed open economies, emerging economies import a substantial part of their equipment and export few or only a selective set of capital goods, (ii) capital good imports display large procyclical business cycle swings, and (iii) unlike developed countries, exports are acyclical in emerging economies. Previous work has shown that emerging economy business cycles are also characterized by strongly countercyclical trade balances, countercyclical real interest rates, and real interest rates that are negatively correlated with future output. I present a small open economy business cycle model that is consistent with these empirical regularities. The key model feature is a two-sector set-up that incorporates the stylized facts that emerging economies import capital goods and exports are acyclical. The second chapter of the dissertation examines the statistical properties of aggregate job and worker flows variables and asks how different kind of shocks (such as technology, monetary and demand shocks) affect the job finding probability of an unemployed person, the job separation probability of an employed person and the number of jobs created and destroyed in a given quarter. We identify the demand and supply shocks by restricting the short-run responses of output and the price level. On the demand side we disentangle a monetary and non-monetary shock by restricting the response of the interest rate. The responses of labor market variables are similar across shocks: expansionary shocks increase job creation, the hiring rate, vacancies, and hours. They decrease job destruction and the separation rate. Supply shocks have more persistent effects than demand shocks. Demand and supply shocks are equally important in driving business cycle fluctuations of labor market variables. Our findings for demand shocks are robust to alternative identification schemes involving the response of labor productivity at different horizons and an alternative specification of the VAR. However, supply shocks identified by restricting the medium-run or long-run response of labor productivity do not have a clear cut response on the labor market variables.

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  • 09/14/2018
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