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Much of macroeconomics is concerned with the allocation of physical capital, human capital, and labor over time and across people. The decisions on savings, education, and labor supply that generate these variables are made within families. Yet the family (and decision-making in families) is typically ignored in macroeconomic models. In this chapter, we argue that family economics should be an integral part of macroeconomics, and that accounting for the family leads to new answers to classic macro questions. Our discussion is organized around three themes. We start by focusing on short and medium run fluctuations, and argue that changes in family structure in recent decades have important repercussions for the determination of aggregate labor supply and savings. Next, we turn to economic growth, and describe how accounting for families is central for understanding differences between rich and poor countries and for the determinants of long-run development. We conclude with an analysis of the role of the family as a driver of political and institutional change.

Defence date: 10 June 2020 (Online) ; Examining Board: Prof. Evi Pappa (EUI and University Carlos III of Madrid, Supervisor); Prof. Axelle Ferrière (Paris School of Economics); Prof. Jean Imbs (NYU Abu Dhabi and Paris School of Economics); Prof. Morten Ravn (University College London) ; The first chapter uncovers a key interaction between government spending, demographics and productivity. I document that age is a key driver of consumption adjustment to government spending shocks, with significantly larger responses among young people, regardless of financial constraints. Further evidence reveals that productivity, wages and hours worked increase relatively more among young workers. I rationalize these findings with a life-cycle model where I introduce learning-bydoing. Young workers accumulate skills on-the-job at a fast rate, while the productivity of the prime-age remains stable. Then, by raising hours worked, a fiscal expansion can generate higher wage increases for young individuals, thus stimulating their consumption. The second chapter analyzes the heterogeneous effects of government spending shocks from a gender perspective. Men typically bear the brunt of recessions due to stronger cyclicality of their employment and wages relative to women's. We study the extent to which fiscal policy may offset or worsen these asymmetric effects across genders. We find that men are hurt or benefit less than women from increases in major government spending components. This result is largely driven by negative spillovers for men working in the private sector. Furthermore, fiscal expansions cannot reconcile both policy goals: offsetting inequitable business cycle effects and closing gender gaps. The third chapter uncovers the crucial role of the horizon in shaping the macroeconomic effects of news shocks, using a novel dataset on worldwide giant mineral discoveries. The median delay between the discovery of a mineral and its exploitation is about twice the delay reported for other commodity-discovery data considered in the literature so far, which allows to study longer-run news events. We find that macroeconomic responses to long-run discoveries are delayed. A news effect appears only two or three years before production starts, underlining an existing, but myopic, e ect of these discoveries on macroeconomic expectations. ; -- 1. Fiscal stimulus and skill accumulation over the life cycle -- 2. From he-cession to she-stimulus? : the impact of fiscal policy on gender gaps -- 3. Short- and long-run news : evidence from giant mineral discoveries

Defence date: 22 June 2021 ; Examining Board: Professor Árpád Ábrahám (European University Institute and University of Bristol); Professor Philipp Kircher (Cornell University); Professor Dean Corbae (University of Wisconsin-Madison); Professor Giovanni Gallipoli (University of British Columbia) ; In the U.S., 40% of students drop out of college. While dropout decisions may constitute an efficient response to students' discovering their low academic ability, they may be inefficient if an able student drops out due to adverse financial shocks. In my job market paper, `The Macroeconomic Cost of College Dropouts', I investigate whether the observed dropout rates generate inefficiency by decomposing driving forces behind dropouts. I provide empirical evidence that the probability of dropping out of college is strongly associated with both ability and finances, even after controlling for other factors. I build a quantitative general-equilibrium overlapping generations model, where individuals face incomplete information on their academic ability and uncertainty about the generosity of financial aid. The model simulations show that uncertainty regarding ability is responsible for 20% of the observed dropout rates, while uncertainty regarding financial aid explains up to 53%. Pursuing a policy that eliminates uncertainty about the college aid would increase the social welfare by as much as 2.3%, benefiting both college graduates and non-college graduates. Such a policy is largely self-financing due to endogenous improvements in skill allocation and associated growth in GDP. In my second project, `Education Affordability and Income Inequality' with F.Wang, we address the broad question of what explains the observed income inequality in the U.S. Different tax progressivity schedules are often named as the main factor that drive the difference in income inequality between the continental European countries and the U.S. (see Guvenen, Kuruscu, and Ozkan (2014), Holter (2015)). In this paper, we revisit the role of tax progressivity in shaping earnings inequality, taking into account another aspect that differs across these countries: the price of attaining a bachelor's degree. In the U.S., the price is much higher than in continental European countries. The OECD (2018) reports that the direct cost for students to attain a bachelor's degree constitutes $55000 in the U.S., while in Germany it amounts to $5000. Motivated by this observation, we study the role of education affordability in shaping earnings inequality in the context of an overlapping generations model where agents, heterogeneous in terms of learning ability, initial wealth, and productivity, decide whether to attend college, subject to borrowing constraints. After calibrating the model to the U.S. economy, we perform a number of counterfactual experiments. We find that the Gini coefficient for before-tax wage income would decrease by as much as 16:2 percent if the current education policy, the fraction of higher education costs borne by the U.S. government, were replaced with its German counterpart. On the other hand, we find that labor tax progressivity plays a less significant role in explaining earnings inequality. Besides, poor households with medium and medium-high abilities would benefit the most from this education reform. Apart from distributional gains, the hypothetical policy reform would also boost macroeconomic activities by increasing labor productivity. Finally, analyzing the transitional dynamics shows that every new generation would be better off in terms of utilitarian welfare if the current education policy was replaced with its German counterpart. In my third project, `Larger transfers financed with more progressive taxes? On the optimal design of taxes and transfers', co-authored with Axelle Ferriere, Gaston Navarro, Philipp Gr ubener, we focus on the interplay between the two most important tools governments have at their disposal to reduce inequality - the income tax schedule and targeted transfers. Specifically, we study the optimal joint design of targeted transfers and income taxes. Within a simple heterogeneous-household framework, we derive two analytical results. First, higher transfers reduce the degree of optimal income tax progressivity. Second, optimal transfers are positive under mild conditions on primitives. This is due to both efficiency and redistribution reasons. Large transfers increase the fiscal burden for the government. Lowering marginal tax rates at the top incentivizes labor supply, which helps the government to raise sufficient revenue. Also, having the transfer in place provides some redistribution, reducing the need for higher tax progressivity. We then quantify the optimal tax-and-transfer system in a richer incomplete-market model with a realistic wealth distribution and unemployment risk. The model features novel exible functional forms for progressive income taxes and means-tested transfers. Relative to the current U.S. fiscal system, our preliminary calibration suggests that the optimal policy consists of more generous means-tested transfers, which phase-out at a slower rate, together with less progressive income taxes. ; -- Part 1. The Macroeconomic Cost of College Dropouts -- 1.1 Introduction -- 1.2 Empirical Analysis -- 1.3 The Model Economy -- 1.4 Calibration -- 1.5 Model Fit -- 1.6 Model Mechanism -- 1.7 Policy -- 1.8 Conclusions -- Part 2. Education Affordability and Earnings Inequality -- 2.1 Introduction -- 2.2 Relation to The Literature -- 2.3 The Model Economy -- 2.4 Calibration -- 2.5 Model Dynamics -- 2.6 Policy Experiments -- 2.7 Transitional Dynamics -- 2.8 Conclusion -- Part 3. Larger transfers financed with more progressive taxes? On the optimal design of taxes and transfers -- 3.1 Introduction -- 3.2 An Analytical Model -- 3.3 Quantitative Model -- 3.4 Conclusion

Defence date: 03 May 2021 ; Examining Board: Professor Ramon Marimon (European University Institute); Professor Russell Cooper (European University Institute); Professor Stephanie Schmitt-Grohé (Columbia University); Professor Pedro Teles (Católica-Lisbon Business & Economics) ; In the first two chapters of this thesis we analyze the impact of an increase in transfer payments - i.e., fiscal stimulus in a form of direct payments to individuals - on budget deficits. In the first chapter we study this issue theoretically and show that in a model with the cash-in-advance constraint on consumption and downward nominal wage rigidity the transfers multiplier is positive when the economy is below its full employment level. Increasing transfers in these circumstances relaxes the cash-in-advance constraint and effectively undoes the inefficiency caused by the wage rigidity. Since this results in higher income and consumption which are both taxed, the fiscal stimulus can possibly be self-financing - it pays for itself in a form of increased tax revenue. We also perform a quantitative analysis and show that under a plausible calibration of the model when the economy is far enough from the full employment, the transfer multipliers are large enough for the tax revenue to increase sufficiently so that the fiscal stimulus largely finances itself. In the second chapter we analyze the self-financing nature of transfer payments empirically and estimate the impulse response functions of GDP, unemployment, consumption and debt to an increase in transfer payments on quarterly data from 1959Q2 to 1991Q4 using the local projection method and exogenous transfers shocks. We show that the stimulus in a form of higher transfers has more pronounced effects when unemployment is high than when it is low. Permanent transfers seem not to affect debt, while temporary transfers are estimated to reduce it after an initial increase, especially in the high unemployment regime - an increase in temporary transfers seems to be not only self-financing, but actually reducing debt when the economy recovers. The third chapter is related to a different topic: we analyze how the terms of trade (TOT) - the ratio of export prices to import prices - affect total factor productivity (TFP). We provide empirical macroeconomic evidence based on the times series SVAR analysis and microeconomic evidence based on industry level data which shows that the terms of trade improvements are associated with a slowdown in the total factor productivity growth. Next, we build a theoretical model in which terms of trade improvement results in putting more resources into physical goods production at the expense of the research and development (R&D) sector, which in turn has a negative impact on knowledge development. ; -- Part 1 Self-financing transfers in a cash-in-advance economy with downward nominal wage rigidity -- 1.1 Introduction -- 1.2 Models -- 1.2.1 Benchmark model - competitive business cycle model with government -- 1.2.2 Downward rigid nominal wages -- 1.3 Policy implications -- 1.3.1 Multiplier -- 1.3.2 Laffer curve -- 1.3.3 Some pleasant fiscal algebra -- 1.3.4 Transfers ensuring full employment -- 1.3.5 Optimal Ramsey policy -- 1.3.6 Alternative fiscal policies -- 1.4 Quantitative analysis -- 1.4.1 Adding capital and capital taxes -- 1.4.2 Calibration -- 1.4.3 Experiments -- 1.4.4 Benchmark model -- 1.4.5 Downward rigid nominal wages -- 1.4.6 Downward rigid nominal wages with an increase in transfers -- 1.4.7 Quantitative results -- 1.4.8 Ramsey optimal policy -- 1.5 Conclusions -- 1.6 Appendix -- 1.6.1 Some pleasant fiscal algebra with capital -- 1.6.2 Results used in subsection 1.3.5 --1.6.3 Deriving the implementability constraint -- 2 What are the effects of higher transfer payments on debt? Are transfers self-financing? -- 2.1 Introduction -- 2.2 Data -- 2.3 Estimation methodology -- 2.4 Results -- 2.5 Conclusions -- 2.6 Appendix -- 2.6.1 Impulse response functions of transfers -- 2.6.2 Structural VAR analysis -- 3 Total factor productivity and the terms of trade -- 3.1 Introduction -- 3.2 Empirical evidence -- 3.2.1 Macroeconomic evidence -- 3.2.2 Microeconomic evidence -- 3.2.3 Evidence on the relationship between R&D and the terms of trade -- 3.3 Model -- 3.3.1 Households -- 3.3.2 Exportable goods producer -- 3.3.3 Technology producer -- 3.3.4 The main mechanism -- 3.3.5 Remaining elements of the model -- 3.4 Quantitative model evaluation -- 3.4.1 Functional forms -- 3.4.2 Calibration -- 3.4.3 Model responses -- 3.5 Conclusions -- 3.6 Appendix -- 3.6.1 Tables -- 3.6.2 Growth of the technology

The dissertation consists of four papers that aim at providing new contributions in the field of macroeconomics, monetary policy and financial stability. The first paper proposes a new Dynamic Stochastic General Equilibrium (DSGE) model with credit frictions and a banking sector to study the pro-cyclicality of credit and the role of different prudential regulatory frameworks in affecting business cycle fluctuations and in restoring macroeconomic and financial stability. The second paper develops a simple DSGE model capable of evaluating the effects of large purchases of treasuries by central banks. This theoretical framework is employed to evaluate the impact on yields and the macroeconomy of large purchases of medium- and long-term government bonds recently implemented in the US and UK. The third paper studies the effects of ECB communications about unconventional monetary policy operations on the perceived sovereign risk of Italy over the last five years. The empirical results are derived from both an event-study analysis and a GARCH model, which uses Italian long-term bond futures to disentangle expected from unexpected policy actions. The fourth paper proposes a DSGE model with an endogenous term structure of interest rates, which is able to replicate the stylized facts regarding the yield curve and the term premium in the US over the period 1987:3-2011:3, without compromising its ability to match macro dynamics.

The Political Economy of Currency Unions: How can a currency union be sustained when member states have an exit option? This paper derives how fiscal and monetary policies can ensure the survival of a common currency, if countries want to leave the union. A union-wide central bank can prevent a break-up by setting interest rates in favor of the country that wants to exit. I show how a central bank does this by following a monetary rule that features time-varying country weights. The paper demonstrates that a central bank can only sustain the union for a while, but not permanently. Fiscal transfers between countries are more effective, as they sustain the currency union also in those situations in which monetary policy fails to do that. Inflation, Interest Rates and the Choice of the Exchange Rate Regime: What is the impact of the exchange rate regime on inflation, interest rates and economic activity? In this paper we provide novel evidence surrounding the gains of a pegged exchange rate regime. We first emphasize that countries with a fixed exchange rate regime tend to have persistently lower inflation and interest rates. In addition to that, we document that volatility of nominal variables is lower with a fixed exchange rate. Last we find that countries that enter a fixed exchange rate regime tend to experience a subsequent increase in GDP growth. We rationalize these findings with a calibrated small open economy model that emphasizes the lack of commitment of central banks when the exchange rate is flexible. In such a regime, an inflationary bias arises that lowers consumption. Pegging the exchange rate to a stable anchor lowers inflation and its volatility by a similar magnitude as in the data. This persistent decline in inflation is beneficial for the economy and leads to an increase in GDP. Consumption Inequality in the Digital Age: This paper measures digital technology in the consumption basket of American households and quantifies its share along the income distribution. We find that rich household have a larger digital share in their consumption basket than poor households. In a model, we quantify the effects of lower prices for digital assets on lifetime consumption for rich and poor households. Abstracting from the impact of digitization on income inequality, we find that the reduction in prices for digital assets alone increased consumption inequality by a large margin.

Abstract: Chapter one The aim of this paper is to examine the role of monetary and fiscal policies in explaining macroeconomic fluctuations in Ethiopia using a structural VAR approach, over the period 1997/1998:1 to 2016/17:4. Its mains results can be presented as follows: first, an increase in government spending has an expansionary effect on output, while an increase in tax revenue has a contractionary effect, with spending multipliers larger than net tax revenue multipliers; second, contractionary monetary policy is associated with a fall in output; third, monetary policy contributes to very small fluctuations in output and it is one of the responsible sources of the high and persistence inflation in the country; fourth, the contributions of fiscal policy shocks are larger than that of monetary policy shocks in explaining movements in output, with roughly equivalent contributions coming from shocks in fiscal policy components. Furthermore, the effects of fiscal and monetary policy shocks on output and inflation have improved qualitatively and quantitatively when both policy variables are jointly examined than estimating a separate model; suggesting the role of a joint analysis of fiscal and monetary policy shocks. ; Abstract: Chapter two This paper explores the international spillovers of the U.S, the Euro Area (EA hereafter), Chinese and Japanese monetary policy shocks on a number of macroeconomic variables in 17 Emerging Market Economies (EMEs). After expansionary monetary policy in these four big economies, industrial production increases in typical emerging markets. These results are robust to most countries considered in the analysis over the sample period. The short-term interest rates also fall in the typical emerging markets regardless of where the shock is originated. However, the response of the real trade-weighted exchange rates in the typical emerging market economies is strong and short-lived after monetary expansion in the Euro Area, but persistent after monetary expansion from the U.S, Japan, and China. Moreover, the size of the responses of the industrial production in emerging Europe and Asia respond more to the monetary innovations in the Euro Area and China, respectively. There is also a substantial cross country heterogeneity in the responses of the macroeconomic aggregates in the emerging markets, where the size of the spillovers vary with the country-specific characteristics. Countries with higher trade openness and higher financial integration display stronger spillover in production as compared to other counterparts after the U.S. and the Japanese M3 innovations. Moreover, the degree of debt burden matters for the transmission of the U.S, the Euro Area and Japan monetary policy shocks and does not seem to matter for monetary expansions in China.

This thesis consists of three independent chapters which deal with macroeconomic topics that drew much attention in the years of financial and economic crisis since 2007. Chapter 1 analyzes how the availability of financial assistance by international lenders, like the International Monetary Fund (IMF), affects the default incentives of a government. The analysis is done using a quantitative model of sovereign default. In this model a default is the optimal decision of the government and can be induced either by bad fundamentals or by self-fulfilling crises due to runs by international investors. Financial assistance is provided by an official lender. It is senior to market debt and associated with conditionality in the form of debt targets. The quantitative analysis, for which the model is calibrated to match Argentinean data, shows that the probability of a default on market debt is higher when financial assistance is available. This result can be explained by the fact, that the financial assistance works as an insurance for the investors. For given fundamentals the government is less likely to default when it has the possibility to receive financial assistance. However, there is a counteracting general equilibrium effect. Given the smaller default risk, the investors are willing to pay a higher price for government bonds. This in turn induces the government to borrow more. The resulting higher average debt levels then lead to more defaults in equilibrium. Chapter 2 also deals with the topic of sovereign default. It analyzes to what extent a standard quantitative model of sovereign default can explain the developments of sovereign interest rate spreads observed for European countries during the crisis in the recent years. More specifically, the model is used to analyze the case of Italy in the time of the crisis on the European sovereign debt markets. The model features default as the optimal decision of the government, includes long-term debt and allows for self-fulfilling default crises. For the quantitative analysis the model is calibrated to match important moments of the Italian data. The analysis shows that while the model is able to match some aspects of the data, it predicts a counterfactual default in the early periods of the crisis, when output was extremely low. Furthermore, the quantitative results suggest that the development of the interest rate spreads are influenced by other factors than only the Italian fundamentals. Interestingly, the long maturity of Italian debt leaves only little room for self-fulfilling crises as considered in the model. Chapter 3 turns to a different topic that has played an important role in the analysis of the financial and economic crisis. Using vector autoregressive (VAR) models, the chapter provides an empirical analysis of the effects of monetary policy shocks and credit shocks on house prices and the broader economy in the United States and the United Kingdom. The shocks are identified using sign restrictions derived from the impulse response functions of a dynamic stochastic general equilibrium (DSGE) model that includes house prices and collateralized credit. The empirical analysis shows that in the U.S. a negative monetary shock leads to a decline in house prices, while there is no clear effect in the U.K. The credit shock, in contrast, has no significant effect on house prices when U.S. data is considered, but has a short-term negative effect in the U.K. The chapter also provides a historical decomposition to shed light on the role of credit and monetary shocks for house price developments.

This thesis consists of three chapters. The first chapter examines empirically the relationship between foreign aid and economic growth in the Least Developed Countries. Instrumental variables techniques are used to estimate the effect that economic growth has on foreign aid and to adjust for the reverse causal effect that growth has on aid when estimating the effect that aid has on growth. The second chapter examines the effects that fiscal expansions have on the unemployment rate. The chapter presents SVAR evidence for ten OECD countries and builds a DSGE model with a labor force participation choice and workers' heterogeneity to explain the empirical findings. The third chapter examines the effects that economic growth has on the support for extreme political platforms. The chapter provides a theoretical model in favor of growth effects (as opposed to level effects) on the support for extreme political parties, and investigates empirically the relationship between growth and extremist votes for 16 OECD countries. Esta tesis consiste en tres capítulos. El primer capítulo examina empíricamente la relación entre la ayuda exterior y crecimiento económico en los países menos adelantados. Técnicas de variables instrumentales se utilizan para estimar el efecto que el crecimiento económico tiene sobre la ayuda exterior y para ajustar el efecto de causalidad inversa que el crecimiento tiene en la ayuda al estimar el efecto que la ayuda tiene sobre el crecimiento. El segundo capítulo analiza los efectos que las expansiones fiscales tienen sobre la tasa de desempleo. El capítulo presenta pruebas SVAR para diez países de la OCDE y construye un modelo DSGE con una participación en la fuerza de trabajo y heterogeneidad de los trabajadores para explicar los resultados empíricos. El tercer capítulo analiza los efectos que el crecimiento económico tiene en el apoyo a las plataformas políticas extremas. El capítulo ofrece un modelo teórico a favor de los efectos del crecimiento (en contraposición a los efectos de nivel) con el ...

Diese Dissertation besteht aus drei Aufsätzen, welche die Effekte von Geld- und Fiskalpolitiken für die Makroökonomie untersuchen. Der erste Aufsatz analysiert, wie das Verhalten der Inflation nach z.B. geldpolitischen Veränderungen erklärt werden kann. Mankiw und Reis (2002) propagieren klebrige Information als eine Alternative zu Calvo klebrigen Preisen, um drei konventionelle Sichtweisen über die Inflation zu modellieren. Ich verwende ein DSGE Modell mit klebriger Information und vergleiche es mit Calvo klebrigen Preisen mit dynamischer Inflationsindexierung wie in Christiano et al. (2005). Ich zeige, dass beide Modelle in meinem DSGE Rahmen gleich gut geeignet sind, die konventionellen Sichtweisen zu erklären. Der zweite Aufsatz untersucht, wie sich das Verhalten von Haushalten und Firmen in den USA und EU-15 infolge von Steuerveränderungen anpasst. Mittels eines neoklassischen Wachstumsmodells zeigt sich, dass die USA und EU-15 auf der linken Seite der Lohn- und Kapitalsteuer Laffer Kurve liegen. Die EU-15 befindet sich jedoch viel näher an der rutschigen Steigung als die USA. Eine dynamische Scoring-Analyse zeigt, dass Steuersenkungen in der EU-15 stärker selbstfinanzierend sind als in den USA. Es folgt, dass es in der EU-15 grössere Anreize durch Steuersenkungen als in den USA gibt. Der dritte Aufsatz analysiert, ob die Fiskalpolitik Steuerreformen vor deren Implementierung vorankündigen soll, um die Wohlfahrt zu maximieren. Domeij und Klein (2005) zeigen, dass Vorankündigung einer optimalen Steuerreform mit Wohlfahrtskosten verbunden ist. Ich prüfe diese Behauptung unter zusätzlicher Berücksichtigung von öffentlichen Gütern und Kapital nach. Ich zeige, dass nutzenbringende und produktive Staatsausgaben die Wohlfahrtskosten durch Vorankündigungen höchstwahrscheinlich reduzieren. Es zeigt sich weiter, dass kurzfristige Konfiszierung und/oder Subvention von Kapital und Löhnen nicht wichtig für die Wohlfahrsgewinne einer hinreichend vorangekündigten Steuerreform sind. ; This dissertation consists of three essays which investigate the economic implications of monetary and fiscal policies on the macroeconomy. The first essay focuses on the question: how can we explain the behavior of inflation in response to e.g. monetary policy changes? Mankiw and Reis (2002) propose sticky information as an alternative to Calvo sticky prices to model three conventional views about inflation. We use a fully-fledged DSGE model with sticky information and compare it to Calvo sticky prices, allowing also for dynamic inflation indexation as in Christiano et al. (2005). We find that both models do equally well in our DSGE framework in delivering the conventional views. The second essay analyzes the question: how does the behavior of households and firms in the US compared to the EU-15 adjust if fiscal policy changes taxes? Using a calibrated neoclassical growth model we show that the US and the EU-15 are located on the left side of their labor and capital tax Laffer curves, but the EU-15 being much closer to the slippery slopes than the US. A dynamic scoring analysis shows that tax cuts in the EU-15 are much more self-financing than in the US. We conclude that there are higher incentive effects in the EU-15 compared to the US in response to tax cuts. Finally, the third essay focuses on the question: should fiscal policy pre-announce tax reforms before their implementation from a welfare point of view? Domeij and Klein (2005) show that pre-announcement of an optimal tax reform is costly in terms of welfare. We reexamine their claim by taking two additional features of government spending into account: public goods and public capital. We show that valuable and productive government spending is likely to reduce the welfare costs of preannouncement. As a further contribution, we show that short-run confiscation and/or subsidy of capital and labor income is not important for the welfare gains of pre-announced reforms with sufficiently long pre-announcement duration.

Published by OpenStax College, Principles of Macroeconomics covers the scope and sequence for a one-semester economics course. The text also includes many current examples, including: the housing bubble and housing crisis, Zimbabwe's hyperinflation, global unemployment and the appointment of the United States' first female Federal Reserve chair, Janet Yellen. The pedagogical choices, chapter arrangements and learning objective fulfillment were developed and vetted with feedback from educators dedicated to the project. The outcome is a balanced approach to economics, to both Keynesian and classical views, and to the theory and application of economics concepts. Current events are treated in a politically-balanced way, as well.

The glaring failure of modern macroeconomics to predict the Global Financial Crisis, and to provide remedies for the Great Recession which followed, has led to renewed interest in alternative approaches to Macroeconomics. There is huge amount of ongoing work aimed at creating a Macroeconomics for the 21st Century. The task is of the highest priority, as failures of economic theory have led to misery for millions. Wrong measures of GDP, and cost-benefit calculation which fail to account for environmental costs, and prioritize private profits over social welfare, have created a climate catastrophe which threatens to destroy the planet. In accordance with the importance of this task, we are expanding the scope of this journal, to cover all new approaches to economics, which fall outside of the boxes of conventional macro, micro, and econometrics of the 20th Century. This article outlines seven broad categories of research directions, and four different methodological principles which fall outside the boundaries of the conventional approach, and offer promise for building a Macroeconomics for the 21st Century. We hope to invite contributions in these areas for future issues.

Defence date: 24 April 2007 ; Examining board: Prof. Mike Artis, University of Manchester, Supervisor ; Prof. Anindya Banerjee, EUI ; Prof. Lionel Fontagné, Université Paris I Panthéon-Sorbonne ; Prof. Massimiliano Marcellino, Università Bocconi ; First made available online on 24 June 2015. ; On the Ist of January 1999 eleven European Union (EU) members fixed their currencies to form the Economic and Monetary Union (EMU). In the run-up to the formation of the euro area candidate countries had to fulfil a set of entry criteria laid down in the Treaty of Maastricht. These consisted of limitations on nominal exchange rate volatility, and on the levels of inflation, interest rate, public debt and fiscal deficit. After the successful formation of the common currency, the countries gave up individual monetary policy to the European Central Bank (ECB), which supposedly, at least for some, meant a gain in credibility and a substantial change in monetary policy in general. Finally, following the latest wave of EU enlargement, which took place on the 1st of May 2004, in the next years we can expect new members to be aiming to join the euro. The five nominal criteria will most certainly be applied to future enlargements. Whilst before EU entry practically all candidate countries declared a willingness to join the euro "as soon as possible" the question whether they are ready and suitable to do so, is important.

APPROVED ; This dissertation consists of three essays in international macroeconomics. It lies at the intersection of balance of payments analysis and sectoral financial analysis. In particular, it makes use of newly available financial accounts data by institutional sector to revisit key issues in international macroeconomics. The first essay (Chapter 2) revisits the period of substantial widening of external imbalances in the run-up to the global financial crisis and their adjustment since then. We take a granular look at these imbalances through the lens of their domestic counterpart: the net financial balance of the household sector, the government, non-financial corporations, and financial corporations. Our findings challenge the often-claimed view that the household sector lies behind most of the dynamics of the current account. In fact, we show that it is the non-financial corporation and the government sectors that account for the bulk of: (i) the co-movement with the standard set of fundamental covariates of the current account; (ii) the external adjustment and expenditure reduction in the aftermath of the global financial crisis; and (iii) the diverging dynamics during large and persistent current account imbalances. These results emphasize that analyzing domestic sectoral balances can lead to a better empirical and theoretical understanding of global imbalances. In the second essay (Chapter 3), we look at the relation between aggregate household wealth dynamics and the net international investment position (NIIP). Household wealth is closely associated with fluctuations in the economy. However, the linkages between household wealth dynamics and cross-border financial holdings have remained unexamined. Thanks to the recent assembly of an essential dataset (Piketty and Zucman, 2014), this paper assesses these co-movements in selected advanced economies. We establish that increases in net household wealth are associated with deteriorations of the NIIP. This pattern is primarily driven by valuation changes in wealth (mostly through house price appreciation). Overall, we find that capital gains on household wealth are strongly related to the accumulation of net external debt liabilities, a key indicator of financial vulnerability. In the final essay (Chapter 4), we use corporate financial balance sheets to estimate the share of foreign portfolio ownership of domestic equities. The essay shows that the current national accounting principles can significantly cloud the interpretation of key macroeconomic statistics in highly globalized economies. A key concept in the balance of payments is the difference in the recording of income between foreign direct investors and foreign portfolio investors. Profit is booked for direct investors as it occurs, but only when it is paid-out via dividends for portfolio investors. In the past few decades, a combination of increases in corporate retained earnings, cross-border holdings, and the changing nature of foreign direct investment flows, has amplified the distortions caused by this principle. Using the national accounts and bilateral foreign portfolio holdings, we estimate the scale of retained earnings attributed to foreign portfolio investors. We show this correction leads to a significant redistribution of (recorded) income in highly globalized economies. In turn, we find that key policy variables such as the current account and gross national income can be misleading.

Principles of Macroeconomics 2e covers the scope and sequence of most introductory economics courses. The text includes many current examples, which are handled in a politically equitable way. The outcome is a balanced approach to the theory and application of economics concepts. The second edition has been thoroughly revised to increase clarity, update data and current event impacts, and incorporate the feedback from many reviewers and adopters. Changes made in Principles of Macroeconomics 2e are described in the preface and the transition guide to help instructors transition to the second edition. The first edition of Principles of Macroeconomics by OpenStax is available in web view here.