Soutenance 4dec.tex

transcript

Soutenance de thèse

Essays on Macroeconomics

Aurélien Poissonnier(aurelien.poissonnier@ec.europa.eu)

Directeur de Thèse : Édouard Challe

École Polytechnique-Insee-Crest

4 décembre 2015

A. Poissonnier (Polytechnique) Soutenance Dec.4 1 / 35

Chapter 1

Consumption, interest rates and

expectations:

a reconciliation

Motivation

A challenge for monetary policy models (Canzoneri et al., 2007)

Euler equation equalizes the monetary policy rate with themarginal rate of intertemporal substitution of consumption (MRS)

US data reject this equality (null or negative correlation)

Comparison of Fedfunds and MRS

1970 1975 1980 1985 1990 1995 2000 2005 2010

MRSFedfunds

Baseline �t to the data: R2adjusted = −1%, no signi�cant coe�cient

Methodology

Full model = Euler equation + expectations + choice of interest rateThe rejection is conditional on

1 households react to monetary policy rate (baseline model)2 expectations = VARX forecast

New tests

1 households may react to another interest rate⇒ each household may arbitrate on a speci�c market (limitedparticipation)

2 baseline method is bias towards rejecting (Euler)⇒ joint MLE (Euler+VARX)

Households speci�c rates

Fedfunds only or with mortgage rate + car loans rate + personal loansrate + 3 month treasury bill (+ deposit rate + return on money)

1 rate 5 ratesFedfunds

log-lik. 1947.81 1977.37R2adj (Euler) -1 32

Estimation yields a sensible mix of interest rates:20% treasury bill + 80% personal loans

Optimal (Rational) expectations ?

Not GMM but MLE → possible to1 depart from rational expectations paradigm

joint estimation improves the �t: R2adj = 46%

2 characterize expectationssmoothed MRS = smoothed expectations

Joint estimation

1975 1980 1985 1990 1995 2000 2005 2010

FedfundsPers. LoansMRSOptimal rate combination

Figure: Interest rates and MRS from a joint estimation

Intuitions from joint estimations

→ behavioural equation: measuring expectations with survey dataimplies more co-�uctuations→ structural break: after the great moderation, di�erent expectationprocess→ inattentive consumers: when in�ation is steadily low, it can beoptimal to form naive expectations

Yes, the Euler equation can be used to describe householdsconsumption in a monetary policy model but

US households respond to the interest rate on personal

loans (lower savings, widespread use of credit cards)

French households respond to the interest rate on regulatedsavings (90% pop. holds a livret)

⇒ weaker transmission of monetary policy

Augmented model

⇒ inattentiveness: forecasting consumption is relatively costless,but in�ation is more complex. When the latter is steadily low, itcan be optimal to form naive expectations.

+ structural break around 1990

A reconciliation

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Euler equation res.MRS1MRS2Optimal rateFedfund

Figure: Interest rates and MRS (inattentive consumer + treasury bill &personal loans & survey + precautionary savings)

Chapter 2

The Taylor principle is valid under wage

stickiness

Outline

Motivation

textbook model of monetary policy with staggered prices andwages

a policy rule reacting to wage in�ation is welfare improving (Galí,2008, chapter 6; Erceg et al., 2000)

does the Taylor principle hold in this set-up ?

Result the frontier of determinacy of the model is

Φp + Φw + Φy(1− β)(λp + λw)

κwλp + κpλw> 1 (1)

Interpretation

Frontier symmetric in price and wage in�ation

generalize the frontier of determinacy with staggered prices only(Woodford, 2001)

generalize the frontier of determinacy in continuous time (Flaschelet al., 2008)

the Central Banker should react more than one for one to

permanent changes in in�ation (Woodford, 2011, chapter 4)

the Central Banker should/could not just focus on price in�ation

Chapter 3

Households Satellite Account for France

Methodological issues on the assessment

of domestic production

with D. Roy

Motivation

System of National Accounts does not record all economic activity

Old debate on the frontier of production (and more fundamentallyon the purpose of SNA: economics or welfare?) (Vanoli, 2002)

Speci�c literature on the valuation of domestic work

Recent focus on Households Satellite Accounts (Eurostat, 2003;Stiglitz et al., 2009) but methodological issues remain

This chapter illustrates such methodological issues on the example ofFrance in 1998 and 2010.

Revision of macroeconomic �gures

Macroeconomic levels are scaled-up

GDP: +33% (+31% in 1998)

disposable income +50% (+49% in 1998)

consumption +58% (+56% in 1998)

savings ratio -4 pp (idem in 1998)

Growth is scaled down

GDP: +15% in HHSA, +20% in SNA

purchasing power of gross disposable income: +17% in HHSA,+27% in SNA

Market or non-market?

Cooking 459 bn e - Restaurants 59 bn e

Cleaning 253 bn e - Housekeepers 6 bn e

Laundry 61 bn e - Dry cleaners 2 bn e

Driving 38 bn e - Transport 27 bn e

Care 92 bn e - Social Services 67 bn e

Methodological issues, two examplesProductive leisures

Overall at least as many hours of domestic work as paid working timeBut the de�nition can double this time

Table: Average working time per person for three possible perimeters ofdomestic work

Perimeter core (I) intermediate (II) extensive (III)

Daily 2 h 07 3 h 04 3 h 53Weekly 14 h 50 21 h 30 27 h 14

Share ofvolunteerwork

3.7% 3.8% 5%

Women'sShare

72% 64% 60%

Coverage: individuals aged 11 and over, France (excl. French Guyana and Mayotte).Source: Insee, 2010 Time Use Survey.

Methodological issues, two examplesImputed taxes and the savings ratio

In 2010 SNA, the savings ratio = 15.9%

no taxes on domestic production and associated income = 13.2%

domestic production includes taxes but taxes are not paid onassociated income = 11.5%

taxes are paid on income from domestic production = -1.6%

Chapter 4

Structural reforms in DSGE models:

a plead for sensitivity analyses

with B. Campagne

Motivation

Increasing use of DSGEs by governments, central banks andinternational institutions to assess the impact of structural reforms:

Quest III (EC), NAWM or EAGLE (ECB), GEM (IMF), SIGMA(FED)...

However, what can these business cycle models tell us aboutstructural reforms?

Our main results

Smets and Wouters' model in line with Blanchard and Giavazzi (2003)

Consumption-leisure arbitrage plays a key role in the transmission ofstructural reforms to the economy

⇒ Frisch elasticity (+ risk aversion and habits) are quantitatively crucial

Welfare analysis shows households might loose upon reform

Need for sensitivity analysis

More fundamental rethink of labour market modelling and the di�erencesbetween short term and long term elasticities.

Channels of transmission of structural reforms...in Smets and Wouters' model

¯RWrk

Capital market Labour market

Capital demand curve

θ−1θ αζ1−α

)α−1

Capital supply curve

rk = 1+rΠ− 1 + δ

Labour demand curve

θ−1θ (1− α)ζ1−α

)α= RW

Labour supply curve

RW = θwθw−1 (1 + σl)cf(l)

¯RWrk

θ−1θ αζ1−α

)α−1

rk = 1+rΠ− 1 + δ

Labour demand curve

θ−1θ (1− α)ζ1−α

)α= RW

Labour supply curve

¯RWrk

θ−1θ αζ1−α

)α−1

rk = 1+rΠ− 1 + δ

Labour demand curve

θ−1θ (1− α)ζ1−α

)α= RW

Labour supply curve

Channels of transmission of structural reformsProduct market deregulation : ↑ substitutability between goods

dividends ↓ and factors' remuneration ↑ (D1 to D')

increased demand for factors translates into ↑ marginal productivity andfurther ↑ demand (D' to D2)

positive wealth e�ect, consumption ↑ and labour supply ↓ (S1 to S2)

¯RWrk

At steady state

capital ↑,labour ↑,production ↑

consumption↑, real wages ↑

Channels of transmission of structural reformsLabour market deregulation : ↑ substitutability between workers

lower marker power of workers implies an increased labour supply for asame wage (S1 to S')

increased labour supply translates into ↑ marginal productivity of capitaland then labour (D1 to D2)

consumption-leisure arbitrage adjusts (S' to S2 - wealth e�ect) but

unchanged real wages in the long-run

At steady state

capital ↑, labour↑, production ↑ inthe sameproportions

consumption ↑,real wagesstagnates

¯RWrk

Channels of transmission of structural reformsQuantitative simulations

Figure: Production Figure: Real wage Figure: Total utility

Steady state variations upon reforms in p.p.

Best practices = standard exercise of convergence towards the threebest EU performers (UK, SW, DK)

Results

Long term output gains but transitory costs

Output enhancing but ambiguous sign for utility

Importance of the households' utility and habits calibration

Additive or multiplicative habits identical in short run butequivalent to change in Frisch and elasticity of substitution in longrun

Conclusion

Four chapters

households behaviour

monetary policy

DSGE modelling

normative and descriptive results

link with the data

Appendix

Test of the Euler equation by maximum likelihood

ifedt − Etπt+1 = δ + σEt∆ct+1 +∑x 6=fed

γx(ixt − i

)+ ζt (Euler)

Yt+1 = [ct+1, πt+1] = EtYt+1 + εt+1 = Λ(L)Yt + ΓXt + εt+1 (VARX)

Baseline

Hyp. expectation errors =VARX residuals

Hyp. households react toFedfunds (γx = 0)

Method �rst MLE (VARX)then MLE (Euler)

New tests

households may react to adi�erent interest rate⇒ γx 6= 0

Baseline method is biastowards rejecting (Euler)⇒ joint MLE(Euler+VARX: [ε, ζ])

A monetary policy model with staggered prices and wages

πpt = βE(πpt+1|t) + κpyt + λpωt (2)

πwt = βE(πwt+1|t) + κwyt − λwωt (3)

ωt−1 = ωt − πwt + πpt + ∆ωt (4)

yt = E(yt+1|t)−1

σ(it − E(πpt+1|t)− r

nt ) (5)

it = Φpπpt + Φwπ

wt + Φyyt + vt (6)

λp =(1−θp)(1−βθp)

θp1−α

1−α+αεp , withI 0 < θp < 1, is the Calvo parameter on pricesI 0 < α < 1, is the Cobb-Douglas parameterI 0 < εp ≤ 1, is the mark-up on goods

⇒ 0 < λp

λw = (1−θw)(1−βθw)θw(1+ϕεw) , with

I 0 < θw < 1, is the Calvo parameter on wagesI 0 < ϕ, is the Frisch elasticityI 0 < εw ≤ 1, is the mark-up on wage setting

⇒ 0 < λw

κp =αλp1−α

κw = λw(σ + ϕ1−α)

Channels of transmission of structural reformsWhat should we expect?

Blanchard and Giavazzi (2003)

I monopolistic competition, entry costs and wage Nash bargainingI production = employment

Reform short-run transition long-run

↓ bargaining power of workerspro�ts ↑, and real

wages ↓

more �rms enter,labour and real

wages ↑

labour ↑ and realwages stagnate

↑ substitutability between goodsreal wages and

labour ↑pro�ts ↓ so �rms

exitneutral

↓ entry costsneutral as �xednumber of �rms

�rms start enteringreal wages and

labour ↑

Long term elasticities of output and utility

Elasticities when performing :

a product market deregulationdYY

α1−α + 1

(1+σl)(1−hl)(1+B) (1 + iycy ))

θ−1 > 0

= (1− σc)(1− hc)[(

α1−α −

1− θw−1θw

θ−1θ

(1−α)(1−hl)(1−hc)cy

(1+σl)(1−hl)(1+B) (1 + iycy )

]dθθ

θ−1

a labour market deregulationdYY

= 1(1+σl)(1−hl)(1+B)

dθwθw

θw−1 > 0

= (1− σc)(1− hc)1− θw−1

θ−1θ

(1−α)(1−hl)(1−hc)cy

(1+σl)(1−hl)(1+B)

dθwθw

θw−1

Soutenance 4dec.tex

Economy & Finance