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Essays in Macroeconomics: Fiscal Policy, Hiring Frictions, Uncertainty, and Risk Sharing

Dates:
  • Tue 24 Nov 2020 17.00 - 19.00
  Add to Calendar 2020-11-24 17:00 2020-11-24 19:00 Europe/Paris Essays in Macroeconomics: Fiscal Policy, Hiring Frictions, Uncertainty, and Risk Sharing

The first chapter uncovers the role of firms' hiring decisions as a novel source of state dependence in the fiscal spending multiplier. A firm that hires faces a tradeoff between current and future production. A fiscal stimulus carried out when the hiring rate is already high induces firms to hire more when it is costlier, resulting in a weaker response to the increased aggregate demand. I provide reduced-form evidence that expansionary spending multipliers are lower when the hiring rate is higher, and I propose a GE model with hiring frictions that is able to rationalize this empirical finding.

The second chapter illustrates how households’ heterogeneity is crucial for the propagation of uncertainty shocks. A HANK model with search and matching frictions and Calvo pricing rationalizes my empirical findings that the aggregate consumption response to a positive uncertainty shock is driven by the bottom 60% of the income distribution. Uncertainty shocks increase the unemployment risk of the imperfectly insured households. When the feedback loop between unemployment risk and precautionary saving is strong enough, a rise in uncertainty leads to a decrease in inflation. Contrary to representative agent NK models, our model qualitatively and quantitatively matches the empirical evidence on uncertainty propagation.

The third chapter empirically assesses whether the introduction of the Euro has changed member states’ ability to smooth consumption. I construct a counterfactual dataset of macroeconomic variables via the Synthetic Control Method to evaluate the performance of Eurozone countries had the Euro not been introduced. I evaluate their risk sharing ability by means of the Asdrubali-Sorensen-Yosha (1996) decomposition on both actual and synthetic data to identify whether there has been an effect and through which channels. I find that the Euro has partially reduced member states’ ability to smooth consumption, especially due to lower risk sharing via credit markets.

Online via Zoom - DD/MM/YYYY
  Online via Zoom -

The first chapter uncovers the role of firms' hiring decisions as a novel source of state dependence in the fiscal spending multiplier. A firm that hires faces a tradeoff between current and future production. A fiscal stimulus carried out when the hiring rate is already high induces firms to hire more when it is costlier, resulting in a weaker response to the increased aggregate demand. I provide reduced-form evidence that expansionary spending multipliers are lower when the hiring rate is higher, and I propose a GE model with hiring frictions that is able to rationalize this empirical finding.

The second chapter illustrates how households’ heterogeneity is crucial for the propagation of uncertainty shocks. A HANK model with search and matching frictions and Calvo pricing rationalizes my empirical findings that the aggregate consumption response to a positive uncertainty shock is driven by the bottom 60% of the income distribution. Uncertainty shocks increase the unemployment risk of the imperfectly insured households. When the feedback loop between unemployment risk and precautionary saving is strong enough, a rise in uncertainty leads to a decrease in inflation. Contrary to representative agent NK models, our model qualitatively and quantitatively matches the empirical evidence on uncertainty propagation.

The third chapter empirically assesses whether the introduction of the Euro has changed member states’ ability to smooth consumption. I construct a counterfactual dataset of macroeconomic variables via the Synthetic Control Method to evaluate the performance of Eurozone countries had the Euro not been introduced. I evaluate their risk sharing ability by means of the Asdrubali-Sorensen-Yosha (1996) decomposition on both actual and synthetic data to identify whether there has been an effect and through which channels. I find that the Euro has partially reduced member states’ ability to smooth consumption, especially due to lower risk sharing via credit markets.


Location:
Online via Zoom -

Affiliation:
Department of Economics

Type:
Thesis defence

Co-Supervisor:
Prof. Leonardo Melosi (EUI and Federal Reserve Bank of Chicago)

Defendant:
Anna Rogantini Picco (EUI - Economics)

Examiner:
Prof. John Fernald (INSEAD and Federal Reserve Bank of San Francisco)
Prof. Antonella Trigari (Bocconi - IGIER)

Supervisor:
Prof. Evi Pappa (Universidad Carlos III de Madrid)

Contact:
Lucia Vigna (EUI - Department of Economics) - Send a mail

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