Essays on Macroeconomics
Abstract
Motivated by the macroeconomic literature on competition and innovation, Chapter
I studies how the anti-competitive behaviour of firms affects the performance of
the economy. I develop a general equilibrium model with endogenous entry and
exit where a finite number of firms, leaders and followers, strategically compete in
the product market and in the innovation activities to improve their productivity .
Moreover, leaders can also implement anti-competitive practices that may prevent
from catching up or leapfrogging the sector frontier. The model allows to identify
and study the different effects through which anti-competitive affects the aggregate
outcomes. Moreover, it provides a plausible interpretation for the for the recent
boost of firms’ anti-competitive practices through the Winner takes all hypothesis.
Motivated by the macroeconomic literature on business cycle fluctuations, in
Chapter II I present the results of the paper, written with my Supervisor Professor
Tatsuro Senga, that analyzes how idiosyncratic shocks to large firms drive the cycle.
The work shows that the mean of idiosyncratic shocks faced by the largest firms is
significantly countercyclical. To examine the quantitative importance of such features
of idiosyncratic shocks faced by large firms, we then develop an equilibrium
business cycle model wherein idiosyncratic shocks can alone alter the shape of the
distribution of firms and thus can drive aggregate fluctuations. The results show
that idiosyncratic shocks can be quantitatively important micro-origin of aggregate
fluctuations. In an frictionless model, Granular shocks, can, in principle, explain the
volatility of output and investment and 30 and 70 percent of consumption and hours
worked. Secondly, large firm movements can account for 25 percent of the output,
20 percent of consumption and 30 percent of the investment and 70 percent of the
hours volatility. Thirdly, we qualitatively show the existence of a second channel,
dynamic inefficiency, that was not present in static granular models.
Motivated by the literature on macroeconomic uncertainty, in Chapter III I present
the results of the paper, written with my colleague Guido Bonatti, that empirically
analyzes how the change in uncertainty modifies the dynamic response of the economic
system to the structural shocks. The aim of this work is to implement an uncertainty
varying VAR model that is able to capture how the uncertainty affects the
effects of the innovations on the economy. This work proposes a VAR model where
the coefficients of the impact effect of the shocks vary because functions of the aggregate
uncertainty level represented by a common factor that moves the volatility
of the structural shocks. The estimation provides some considerable results. First
changes of the idiosyncratic part of the impact effect coefficients are very small and
the fluctuation of the covariances are mainly due to the movement of the factor:
this could mean that the monetary authority and the household did not change the
preference during the period considered. Second, Interest Rate reacts differently to
GDP and Inflation changes depending on the uncertainty level, as well as Inflation
following GDP fluctuations.
Authors
Varotto, IacopoCollections
- Theses [4235]