Regime Change in Macroeconomics－Three Essays on Monetary Policy, Asset Prices and Real Exchange Rates
Date Issued
2009
Date
2009
Author(s)
Chou, Yu-Hsi
Abstract
It is an indispensable task for macroeconomists to construct the theory, and provide the possible explanation on the evidence of regime change in macroeconomic data. However, comparing with the number of empirical studies, the efforts made in investigating the impact of regime change based upon theoretical framework are relatively small in the literature. For these reasons, we studied several topics in macroeconomics with regime shift is in presence, and associated it with empirical findings.n Chapter 1, we investigate the quantitative importance of expectation formation effects on real exchange rate volatility using a small open economy New-Keynesian model incorporates with an empirical relevant, Markov-switching monetary policy rule. We find the expectation formation effects can be substantial in explaining the real exchange rate volatility. The impact of the expectation formation effects can be either amplified or stabilized, depending on different types of shock, current regimes, and the changes in expectation formation process. Ignoring these effects and conducting the empirical analyses based on the model with fixed policy rules can be fraught with hazards. This result also resembles the importance of Lucas'' critique when the expectation effect is taken into account.e explore the asymmetric effect of house prices on various categories of consumption under constrained and unconstrained regimes in Chapter 2. We first present a partial equilibrium Life-Cycle model, explicitly considering the dual role of housing and linking creditonstraints to the behavior of consumption in a pair of aggregate Euler equations. We then estimate a threshold regression model and find that Life-Cycle/Permanent-Income-ypothesis (LC-PIH) holds only under the unconstrained regime. More importantly, durable consumption exhibit a very strong asymmetric effect in response to changes inouse prices, while other categories of consumption do not exhibit this asymmetry.n Chapter 3, we study the possible asymmetric effect of monetary policy on house prices under different credit regimes. We first derive the implications of a simpleeneral equilibrium model in which agents may be collateral-constrained. Using the threshold vector autoregression (TVAR) model, two different measures of credit market conditions are computed to serve as the thresholdariable. We find that house prices react to a monetary shock initially stronger but less persistent in credit boom regime than in normal credit regime.
Subjects
Real Exchange Rates
Taylor Rule
Life-Cycle Permanent Income Hypothesis (LC-PIH)
Collateral Constraint
House Prices
Threshold Vector Autoregression (TVAR)
Type
thesis
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