Abstract

This dissertation consists of three independent articles in the field of Macroeconomics. The first chapter investigates the implications of various Quantitative Tightening strategies, examining both implementation and announcement effects. We focus on the consequences for financial stability and real variables, particularly the impact of reintroducing government bonds to the market, the role of reserves demand and balance sheet costs of financial intermediaries during the unwinding process. We also explore the dynamics associated with announcement effects. We explore optimality and compare cases of commitment and discretion, as well as credibility and limited commitment. Our findings indicate that announcing QT with sufficient anticipation yields better macro-financial outcomes. While sales initially have a relatively short-term stimulative effect due to agents precautionary motives, negative implementation effects eventually arise. Announcing passive unwinding followed by conducting sales leads to lower welfare and higher output volatility. Optimal QE is aggressive and optimal QT is gradual. QT should be more gradual when the maturity of debt is higher and reserves demand is higher. Under the optimal dual policy with commitment, the output gap closes and fully stabilizes 12 quarters earlier than observed in the data. T he second chapter studies the corporate debt structure under both conventional and unconventional monetary policies. We provide empirical evidence that unconventional monetary policy increases the corporate debt-to-bank loans ratio, while expansionary conventional policy raises the share of bank loans in relative terms. We then build a quantitative model with households, a production sector consisting of both bank-dependent and non-bank-dependent firms, banks that provide loans, and funds that trade bonds. We show that a QE shock increases the corporate debt-to-bank loans ratio, while a decrease in the interest rate on reserves has the opposite effect. Finally, the third chapter studies the transmission of monetary policy in economies with high levels of informality and financial markets segmentation. We show evidence of a negative correlation between different indicators of financial inclusion and the size of the informal economy. Based on this stylized fact, we build a monetary model with “formal” and “informal” households featuring limited participation in financial markets as in Williamson 2008. The degree of interaction between the two types of agents in the goods markets determines the transmission of monetary policy from the financial sector to the rest of the economy. We show analytically that the optimal inflation rate is increasing in the size of the informal sector, for a given path of fiscal policy. We calibrate the model to Mexico and discuss various policy experiments.

Committee Chair

Francisco Buera

Committee Members

Linda Schilling; Miguel Faria-e-Castro; Philippe Andrade; Rodolfo Manuelli

Degree

Doctor of Philosophy (PhD)

Author's Department

Economics

Author's School

Graduate School of Arts and Sciences

Document Type

Dissertation

Date of Award

5-2-2025

Language

English (en)

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Economics Commons

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