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Description:
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My dissertation studies various questions falling into the broad context of
macroeconomics and international economics . The questions have macroeconomic
components because they are concerned with the behavior of aggregates . Specifically ,
the second and third chapters of my dissertation study the causes of fluctuations in
aggregate macroeconomic variables and the way policy can be coordinated
internationally to reduce these fluctuations , respectively . In addition , chapters III and IV
address questions that fall into the realm of international economics . They are concerned
with the optimal exchange rate regime between two countries , the consequences of
partial exchange rate pass -through and the effect of an increase in vertical Foreign Direct
Investment (FDI ) by domestic firms . The framework of my analysis is given by different
versions of general equilibrium models .
The second chapter of my dissertation decomposes fluctuations in aggregate observables
for the UK economy during the 1980s recession . Using a modern accounting procedure ,
I estimate parameters that describe the economy using annual data from 1970 to 2002 . Then , I simulate different versions of the model to find the distortions that are essential
in driving the observed fluctuations . I find labor market distortions to be crucial in
accounting for the episode , suggesting that the policies of the time were well targeted
and effective .
The third chapter of my dissertation studies policy coordination in a two -country
framework allowing for partial pass -through . In particular , both countries are assumed to
have monetary and fiscal stabilization instruments available . The optimal setting of these
instruments under differing pass -through regimes is analytically derived . Fiscal policy is
found to be used in a counter -cyclical fashion . In addition , the magnitude of fiscal
stabilization is the largest when pass -through is partial .
In the fourth chapter , I study the consequences of vertical FDI on aggregate productivity
and welfare . The framework allows for heterogeneity across firms in two dimensions . It
is firms that are at a disadvantage with respect to manufacturing costs that are benefiting
most from moving their production process abroad . Overall , the ability to engage in
vertical FDI increases productivity , lowers prices and thus increases welfare . |