Universität zu Köln

Kaufmann, Christoph (2017). Essays in Monetary and International Macroeconomics. PhD thesis, Universität zu Köln.

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Abstract

This thesis consists of three self-contained chapters that contribute to the research fields of monetary and international macroeconomics. This first chapter studies Ramsey-optimal monetary and fiscal policy in a New Keynesian 2-country open economy framework, which is used to assess how far fiscal policy can substitute for the role of nominal exchange rates within a monetary union. Giving up exchange rate flexibility leads to welfare costs that depend significantly on whether the law of one price holds internationally or whether firms can engage in pricing-to-market. Calibrated to the euro area, the welfare costs can be reduced by 86% in the former and by 69% in the latter case by using only one tax instrument per country. Fiscal devaluations can be observed as an optimal policy in a monetary union: if a nominal devaluation of the domestic currency were optimal under flexible exchange rates, optimal fiscal policy in a monetary union is an increase of the domestic relative to the foreign value added tax. The second chapter deals with the effects of forward guidance and is based on joint work with Christian Bredemeier and Andreas Schabert. Announcements of future monetary policy rate changes are found to be imperfectly passed through to market interest rates. Specifically, we provide evidence that measures of liquidity premia systematically respond to forward guidance statements of the US Federal Reserve Board implying that rates on relatively less liquid assets react by less than, e.g., those of Treasuries. To assess the macroeconomic implications of this finding, we apply a New Keynesian model augmented with liquidity premia stemming from differential pledgeability of assets in central bank operations. Consistent with empirical evidence, announcements of future reductions in the policy rate lead to an increase in liquidity premia and are substantially less effective compared to a standard New Keynesian model, providing a solution to the so-called "forward guidance puzzle". The last chapter addresses macroeconomic consequences of demographic change. It is based on joint work with Max Groneck. Demographic change raises demand for non-tradable old-age related services relative to tradable commodities. This demand shift increases the relative price of non-tradables and thereby causes real exchange rates to appreciate. We claim that the change in demand affects prices via imperfect intersectoral factor mobility. Using a sample of 15 OECD countries, we estimate a robust increase of relative prices. According to our main estimate, up to one fifth of the average increase in relative prices between 1970 and 2009 can be attributed to population ageing. Further findings confirm the relevance of imperfect factor mobility: Countries with more rigid labour markets experience stronger price effects.

Item Type:	Thesis (PhD thesis)
Creators:	Creators Email ORCID ORCID Put Code Kaufmann, Christoph christoph.s.kaufmann@gmail.com UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-78642
Date:	30 August 2017
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Faculty of Management, Economics and Social Sciences
Subjects:	Economics
Uncontrolled Keywords:	Keywords Language Monetary union; Optimal monetary and Fiscal policy; Exchange rate English Forward guidance; Unconventional monetary policy; Liquidity premium English Demographic change, Relative price of non-tradables, Real exchange rate English
Date of oral exam:	30 August 2017
Referee:	Name Academic Title Schabert, Andreas Univ.-Prof. Dr. Krause, Michael Univ.-Prof. ,Ph.D.
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/7864