Essays on Macroeconomics
Abstract: This thesis consists of three essays on macroeconomics. “Inattentive Consumers in General Equilibrium” explores the effects of heterogeneity in planning propensity on wealth inequality and asset prices. I consider a model where attentive agents plan their consumption, savings, or stock holdings period by period, while inattentive ones plan every other period. Inattentiveness affects wealth inequality through two different channels: it increases wealth accumulation of the inattentive group via a precautionary savings motive and decreases it via negative price effects. When income is stochastic, the inattentive consumers accumulate more wealth. In contrast, in a two-period portfolio choice model with uncertain asset returns, infrequent revisions of portfolios can produce the opposite result: inattentive investors accumulate less wealth.“Monetary Regime Change and Business Cycles” analyzes how changes in monetary policy regimes influence the business cycle in a small open economy. We estimate a DSGE model on Swedish data, explicitly taking into account the monetary regime change in 1993, from exchange rate targeting to inflation targeting. The results confirm that monetary policy reacted primarily to exchange rate movements in the target zone, and to inflation in the inflation targeting regime. Devaluation expectations were the principal source of volatility in the target zone period. In the inflation targeting period, labor supply and preference shocks are more important.“Do Central Banks React to House Prices?” asks whether the U.S. Fed, the Bank of Japan and the Bank of England have reacted to house price inflation. We study the responses of these central banks by estimating a DSGE model for each country where credit constrained agents borrow using housing as collateral. The main result is that house price movements did play a separate role in the U.K. and Japanese central bank reaction functions in the last years, while they did not in the U.S.
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