Essays in Macroeconomics and Finance

Abstract

This dissertation contains three chapters on macroeconomics and finance. The first chapter, co-authored with Andreas Schaab, studies the scope for international cooperation in macroprudential policies in the presence of fire sales and other externality problems. It shows that although national governments employing quantity regulations fail to achieve the globally efficient outcome absent cooperation, surprisingly national governments employing Pigouvian taxation can achieve the globally efficient outcome even without cooperation. The second chapter, co-authored with Andreas Schaab, provides a framework to study bail-in regimes for banks. It shows that although bail-ins are an optimal regulatory regime, they can also create refinancing instabilities, leaving a role for fiscal backstop measures such as debt guarantees in the crisis resolution toolkit. The third chapter, co-authored with Andreas Schaab, studies whether a central bank should have flexibility to change its inflation target. It shows that a dynamic inflation target can implement the constrained efficient level of inflation, provided that the target is adjusted sufficiently in advance of it taking effect.