Browsing by Subject "Structural VAR"

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Open Access
Essays on macroeconomics
(2015-09) Kantur, Zeynep
This dissertation consists of three essays on two topics in macroeconomics. The first essay focuses on the monetary policy implications in an aging society. The second and third essays revisit the famous Shimer puzzle in a theoretical and an empirical framework in a different perspective. The first essay shows the impact of aging on effectiveness of monetary policy. To do so, it introduces an OLG-DNK framework where the demand side is represented by a two period overlapping generations setup and the supply side of the economy follows a New Keynesian framework. The model enables the study of the interaction of monetary policy with demographics in a coherent general equilibrium model. The main finding is that this merger of two basic strands of the macroeconomics literature implies monetary policy should be expected to be less effective as societies age since the interest rate sensitivity of real economic activity declines as the population ages. The second essay studies the effect of employment-to-employment ows in a New Keynesian model with labor market frictions. Although New Keyne sian models with labor market frictions found an increase in unemployment and a decrease in labor market tightness in response to a positive technology shock (which appears to be in line with the recent empirical findings), the volatilities of these variables are not as high as their empirical counterparts. In that regard, we assume two types of firms which offer different wage levels, thereby incentivizing low-paid agents to search on-the-job. Differently from the literature, the main source of wage dispersion is the assumption of different bargaining powers of firms. The proposed model generates a higher volatility of unemployment and labor market tightness in response to a positive technology shock compared to the model without on-the-job search. Moreover, it is shown that bargaining power and on-the-job search intensity have an amplifying effect on the unemployment rate. Finally, the last essay is an empirical application of the theoretical model proposed in Chapter 3. This essay revisits the Shimer (2005) puzzle by covering a longer period, 1951-2014, than Shimer's exercise. Firstly, essay shows some stylized facts on U.S. labor market by using raw data and a structural VAR model. Then, the study tests the performance of the model utilized in Chapter 3. The structural VAR models shows that there is a positive correlation between productivity and unemployment and negative correlation between productivity and labor market tightness conditional to technology shock. In addition, I show that the model with on-the-job search component adds more amplification to the standard New Keynesian model with labor market frictions and it is capable of generating both the magnitude and the sign of the fluctuations of labor market variables to productivity shocks.
Open Access
Two essays on the link between inflation uncertainty and interest rates and effect of foreign income on economic performance of a small-open economy
(2005) Kılınç, Zübeyir
This study includes two studies on the relationship between inflation uncertainty and interest rates and examines the effects of foreign income on economic performance of a small open economy. In the literature, there is no consensus about the direction of the effects of inflation uncertainty on interest rates. The second chapter of this study states that such a result may stem from differentiation in the sources of the uncertainties and analyzes the effects of different types of inflation uncertainty on a set of interest rates for the UK within interest rate rule framework. Three types of inflation uncertainties – impulse uncertainty, structural uncertainty and steady-state uncertainty – are derived by using a time-varying parameter model with a Generalized Autoregressive Conditional Heteroskedasticity specification. It is shown that the impulse uncertainty is positively and the structural uncertainty is negatively correlated with the interest rates. Moreover, these two uncertainties are important to explain shortterm interest rates for the period of inflation targeting era. However, this time, the impulse uncertainty is negatively and the structural uncertainty is positively correlated with the overnight interbank interest rates, which is consistent with the general characteristic of the inflation targeting regimes. The evidence concerning the effect of the steady state inflation uncertainty on interest rates is not conclusive. The third chapter uses the same methodology of the second chapter and calculates the effects of those three types of inflation uncertainties on interest rate spreads. It is found that both the structural and steady-state inflation uncertainties increase interest rate spreads, while the empirical evidence for the impulse uncertainty is not conclusive. Finally, the last chapter examines how the changes in a large foreign economy affect the economic performance of a small country. It finds the values of effects by calculating impulse response functions of the domestic economy and confidence intervals for those functions. Turkey is chosen as the domestic economy and Germany, the US, and the industrial countries are used as proxies for the large economy. The results state that a positive shock in the foreign economy positively affects domestic economy, increases the inflation rates, and appreciates the real exchange rate.