Zavalloni, Luca (2018) Essays in macroeconomics. PhD thesis, University of Warwick.

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Abstract

This dissertation consists in three essays that share as a common motivation the study of economic policy in models of general equilibrium. A brief summary is presented below.

Ch.1 Perfectly competitive markets for sovereign bonds that carry default risk are characterized by what we label as the non-exclusivity externality: when the ownership of debt is anonymous and dispersed, the equilibrium price of new debt on the primary market might be too low to avoid default, even though preventing default would be in the interest of existing creditors. We show that a policy maker can solve this externality ex-post, but the benefit exante depends crucially on the ability of the government to tax bond holdings.

Ch.2 This chapter studies a stylised RBC in a model where credit markets are subject to adverse selection. On the normative side we show that competitive equilibria are constrained suboptimal when hidden information problems are severe. On the positive side, we show that a purely informational shock that shifts the distribution of firms subject to asymmetric information, might be an important driver of business cycle fluctuations.

Ch.3 We analyse how different types of monetary policy regimes and constraints affect debt limits, defined as the maximum level of debt an economy can service. We find that a more reactive monetary policy stance generally raises the debt limit, by reducing the inefficiencies linked to inflation fluctuations. On the other hand the ZLB negatively affects debt limits by amplifying the fall in tax revenue and muting the decrease in the interest rate. We then show that making debt limits endogenous to monetary policy considerations has important consequences on the transmission of fiscal policy shocks.

Item Type:	Thesis or Dissertation (PhD)
Subjects:	H Social Sciences > HB Economic Theory
Library of Congress Subject Headings (LCSH):	Macroeconomics, Debts, Public, Business cycles, Tax and expenditure limitations
Official Date:	22 October 2018
Dates:	Date Event 22 October 2018 UNSPECIFIED
Institution:	University of Warwick
Theses Department:	Department of Economics
Thesis Type:	PhD
Publication Status:	Unpublished
Supervisor(s)/Advisor:	Polemarchakis, H. M. (Heraklis M.) ; Pancrazi, Roberto
Sponsors:	Economic and Social Research Council (Great Britain)
Format of File:	pdf
Extent:	vii, 116 leaves : illustrations, charts
Language:	eng

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