Essays on Macroeconomics, Finance, and Energy

Abstract

Macroeconomic stability, access to finance, and access to reliable energy are three critical pillars of economic growth and development. This dissertation is composed of three independent essays that examine the impacts of government activity on each of these areas. The first chapter measures exchange rate pass-through in the presence of parallel markets. It offers a partial solution to the puzzle of limited retail price inflation following large devaluations in emerging market and developing countries. Using data from Nigeria, I find that the parallel market can be systemically important across many economic sectors. Therefore, estimates that only take into account large movements in the official rate understate true pass-through, as changes in the parallel rate have already caused inflation to occur. The second chapter examines the relationship between crowding out and financial depth. After documenting this negative correlation across countries and time, we make use of extensive credit registry data from Nigeria to causally identify the impact of changes in bank holdings of government debt on changes in the supply of credit to the private sector. We show that the magnitude of crowding out varies according to the level of market depth for different government securities. The third chapter explores Togo's attempts to drive rural electrification, through a subsidy program for solar home systems and an expansion of mobile money agents that makes it easier for households to pay their electricity bills. Evaluating the impact of these policies, we argue that prior estimates of low demand for electricity in similar contexts are suppressed by high transaction costs (customers must travel far to pay through mobile money agents), which are amplified by strong liquidity constraints that prevent households from borrowing. In the presence of such liquidity constraints, we show that policies that reduce electricity prices alone may not be enough to increase adoption, unless they are enhanced by complementary policies that reduce transaction costs.