Essays in Macroeconomics

Abstract

The present work explores some of the key questions of macroeconomic analysis: causal effect of monetary policy, causal effect of fiscal policy and the behavior of macroeconomic data in abnormal periods.

The first chapter presents the development and the application of the novel identification method, the negative control approach, in the in macroeconomic setting. To identify the causal effects of the market interest rates on the macroeconomic outcomes of interest, we employ macroeconomic news and measures of Fed policy as the auxiliary variables satisfying orthogonality restrictions derived from the analysis of the information flow.

The second chapter utilizes the dataset of federal government contract spending to estimate the local multiplier. We present the baseline estimates using the newly constructed dataset and propose and explore three key potential hindrances: heterogeneity, endogeneity and spillovers. The first two factors seem to be particularly relevant in driving the estimates towards zero and adjustments in this respect doubles the estimated multiplier values.

The third chapter looks at the broad dynamics of the macroeconomic data in the context of abnormal variations as represented by the Covid period. The addition of a new dynamic factor in the Covid period helps absorb a large amount of the anomalous variation and presents a viable alternative to omitting the Covid period data in use for macroeconomic analysis.