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Three essays in macroeconomics

Kim, Chanwoo; (2020) Three essays in macroeconomics. Doctoral thesis (Ph.D), UCL (University College London). Green open access

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Abstract

This thesis consists of three independent papers on macroeconomics. Chapter one provides the introduction of the papers. \\ Chapter two investigates the response of firm-level markup to aggregate shocks and the role of intangible capital in markup determination. A markup is a key object in understanding a firm’s pricing behavior. Using a panel version of local projection, I document noble evidence that firm-level markup is countercyclical to aggregate productivity and monetary policy shock. To explain the empirical evidence, I combine Hopenhayn (1992) firm dynamics model with habit accumulation at a good level (Ravn et al., 2006). After calibrating the model to US data, I find that the model can quantitatively match the empirical evidence. Furthermore, the model endogenously matches the age-dependent growth rate and the exit rate, which the profession had difficulty with. \\ Chapter three asks, “how a firm responds to tax shock in the short run?”. Differently from the existing literature, I exploit narratively identified shock and study the firm-level response over the business cycle using local projection instrumental variable approach. I find that intangible and tangible investment and labor use increase, while leverage goes down. Firm revenue productivity and markup increase, but firm churn is stable in the short run. Extrapolating the estimates, I project that the effect of the 2017 tax cut is significant. \\ Chapter four studies the effect of forward guidance under an incomplete market. In standard New Keynesian models, there is a peculiar property called “forward guidance puzzle”: if a central bank promises to cut its policy rate from a farther future, the effect of promise strengthens. There exists debate that the introduction of an incomplete market can solve the puzzle, or it additionally requires procyclical income risk. Building on Ravn and Sterk (2020), my paper analytically proves that income risk cyclicality matters.

Type: Thesis (Doctoral)
Qualification: Ph.D
Title: Three essays in macroeconomics
Event: UCL
Open access status: An open access version is available from UCL Discovery
Language: English
Additional information: Copyright © The Author 2020. Original content in this thesis is licensed under the terms of the Creative Commons Attribution 4.0 International (CC BY 4.0) Licence (https://creativecommons.org/licenses/by/4.0/). Any third-party copyright material present remains the property of its respective owner(s) and is licensed under its existing terms. Access may initially be restricted at the author’s request.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10108793
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