2016 Theses Doctoral
Essays in Macroeconomics
This dissertation consists of three chapters.
Chapter 1, "Precision of Communication in Coordination Games of Regime Change,'' is in the field of macroeconomics and economics of information. I study a model of regime change in which the government can communicate with different levels of precision as a function of the underlying fundamentals. In the model, higher precision of communication corresponds to a lower dispersion of private information among market participants. I compare a policy of an uncommitted government, which chooses the precision of communication after it learns the realization of fundamentals, to a policy of a committed government, which commits to a state-dependent policy before it learns the realization of fundamentals. I find that an uncommitted government communicates imprecisely for weak fundamentals and precisely for strong fundamentals. In contrast, a committed government communicates precisely for weak fundamentals and imprecisely for strong fundamentals. Consequently, a committed government saves its regime more often than an uncommitted one. An uncommitted government can benefit from a rule that enforces constant precision of communication.
Chapter 2, "Multiple Equilibria in Global Games with Varying Quality of Information,'' is a follow up chapter on Chapter 1. I show that global game models can have multiple equilibria if the quality of information available to agents varies with the state of economic fundamentals. First, I construct two examples that illustrate why the quality of information may vary and show that the corresponding information structures support several equilibria. Second, I construct an information structure that supports a given number of equilibria. Very different equilibria can exist simultaneously, even if agents' quality of information is arbitrarily high. The set of possible equilibria can be very similar to the set of equilibria under complete information, even when agents are uncertain about the state of fundamentals and beliefs of other agents. My results have practical implications for the disclosure of information by governments and for our ability to predict the outcome of currency attacks or debt runs based on economic fundamentals.
Chapter 3, "Long-Run Price Elasticity of Trade and the Trade-Comovement Puzzle,'' is in the field of international macroeconomics and is coauthored with Lukasz Drozd and Jaromir Nosal. What role do international trade linkages play in transmitting shocks across borders? Analytically, we demonstrate that in a broad class of open economy macroeconomic models, shock transmission crucially depends on dynamic properties of trade elasticity---which is rarely modeled explicitly in business cycle theory. We illustrate the quantitative relevance of this point by exploring the well documented link between trade and comovement in the cross-section of countries, and by relating our theoretical findings to those in the literature. We find that dynamic elasticity does indeed affect the findings in a quantitatively significant way. Hence, our paper advocates for using dynamic elasticity models in contexts that evaluate international business cycle theory vis-a-vis data on cross-country variation of business cycle moments.
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More About This Work
- Academic Units
- Thesis Advisors
- Woodford, Michael
- Ph.D., Columbia University
- Published Here
- April 29, 2016