Fachgebiet Applied Economics

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Structural vector autoregressions and information in moments beyond the variance
(2022) Keweloh, Sascha Alexander; Linnemann, Ludger; Jentsch, Carsten
This dissertation is concerned with the estimation of the simultaneous interaction in non- Gaussian SVAR models using generalized method of moments (GMM) estimators with higher- order moment conditions. The dissertation contributes to the literature by providing identification results using higher-order moment conditions derived from the assumption of independent structural shocks, by proposing modifications to the GMM estimation procedure to improve the small sample performance in the presence of higher-order moment conditions, and by developing a framework to combine traditional restriction based approaches with data-driven identification and estimation approaches.
Short-run shocks, longer-run consequences: how business cycle fluctuations affect technological progress
(2022) Seepe, Andre; Linnemann, Ludger; Jung, Philip
This dissertation is composed of four self-contained chapters and complements the recent stream of literature that tries to integrate short-run business cycle fluctuations and long-run technological progress. It therefore adds endogenous technological progress to otherwise standard real business cycle models and takes a look on the longer-run implications of classical business cycle shocks. The first chapter analyses how matching efficiency shocks affect the firm's innovation decision. It is noted that the slowdown in TFP growth during the Great Recession was accompanied by an outward shift in the Beveridge Curve, which is typically thought to be induced by a strong decline in matching efficiency during this time. It is argued that this outward shift in the Beveridge Curve was a major contributor to the slowdown in endogenous TFP growth. The second chapter deals with the longer-run effects of inflation target shocks. If the inflation target is increased, the economy experiences a period of adjustment to the new long-run inflation rate. In a Newkeynesian model, price markups decrease during this period and thus the gain of innovation. The empirical assessment of the model shows that longer-run changes in the inflation target due to inflation target shocks reduce technological progress. The third chapter takes a look at monetary policy and stock market shocks from a more econometric point of view. It is argued that neither short- nor long-run restrictions can be used to identify the SVAR here. A partly recursive, partly data-driven identification scheme to solve this identification problem is proposed and monetary policy shocks are found to have an instantaneous and long-run negative effect on stock prices and output. The fourth chapter examines the effect of true news and noise on technological progress in an SVAR. It is assumed that stock prices and research spending contain information regarding news, while researchers have an informational advantage concerning the truth of research related news. The main result is that true news shocks lead to an immediate increase in research spending and stock prices, while noise shocks that induce the same stock price reaction are associated with a much more cautious response in research spending and a weaker effect on stock prices.
Essays on fiscal policy: trade balance deficits, private debt deleveraging, and heterogeneous agents
(2019) Ivens, Annika; Linnemann, Ludger; Winkler, Roland
This thesis addresses three issues of (optimal) fiscal policy related to recent economic developments. The first essay refers to specific economic problems arising in a monetary union by building on a two-country DSGE model where the two countries belong to a monetary union featuring intra-union trade balance imbalances. It is explored if and how a unilaterally implemented budget-neutral tax shift from direct to indirect taxation (fiscal devaluation) may decrease these imbalances. The fiscal devaluation is simulated as a decrease in the social security contributions and an increase in the value added tax. In the first part of the essay, the determinants of the effectiveness of a fiscal devaluation in raising the trade balance are explored. In the second part, these insights are used to simulate a fiscal devaluation applied in the Euro area countries featuring large trade balance deficits. It is found that a fiscal devaluation may be quite effective in reducing trade balance imbalances. In the second essay, the event of a financial shock is regarded. A closed-economy DSGE model is used to simulate a private debt deleveraging shock in a situation where the monetary policy is constrained by the zero lower bound. It is shown that huge welfare losses may arise in such a situation where nominal interest rates are at the zero lower bound. Building on this insight, fiscal policy measures aiming at economic stabilization are investigated. It is found that applying a constrained-optimal fiscal policy in this situation of monetary policy being constrained by the zero lower bound may be highly effective where following the optimal fiscal policy implies a prolonged period of zero interest rates. Finally, the third essay addresses the issue of national distributive effects of these fiscal policy measures by regarding heterogeneous agents within a single country and raising the question of an appropriate social welfare measure. A closed-economy DSGE model populated by two types of households is used to simulate an interest spread shock. While in the main part of the paper the Ramsey planner is modeled in a utilitarian fashion, the results are compared to the case of a Ramsey planner maximizing a social welfare function in the spirit of Rawls. The results indicate that welfare losses of an interest spread shock can be reduced to a larger extent by taxing interest income than by using wage taxes. Moreover, as a central point, it is found that maximizing economy-wide welfare may involve enlarging the disparity between agents if using a utilitarian definition of a social welfare function. Using a social welfare function in the spirit of Rawls can completely offset the disparity between groups but implies a significant decrease in the savers' welfare as well as large output fluctuations. In sum, this thesis shows that fiscal policy may be quite effective in mitigating welfare losses of economic adjustment processes or financial shocks but that distributive issues of these policies seem to be of importance and should be considered in the context of optimal fiscal policy.
The distributional implications of business cycles and fiscal policy
(2019) Krause, Christopher; Linnemann, Ludger; Winkler, Roland
This thesis presents three self-contained essays that emphasize the relevance of household heterogeneity and distributional implications in the analysis of business cycle dynamics and fiscal policy. In Chapter 2, I investigate the impact of redistributive taxation on private borrowing constraints and the cross-sectional distributions of consumption and income. I show that tax policy can have a substantial effect on households’ access to private credit markets in the sense that borrowing constraints become tighter when redistribution is increased. Chapter 3 studies the role of household heterogeneity in the transmission of government expenditure shocks and provides a mechanism that naturally generates state-dependent fiscal multipliers. In Chapter 4, I demonstrate that interpersonal comparison is an important driver of short-run credit movements.
Demographic change, migration and public pensions - a macroeconomic analysis
(2018) Bickmann, Marius; Linnemann, Ludger; Jung, Philip
This thesis contains three self-contained papers contributing to the literature on demographic change, migration and public pensions. Chapter 2 introduces the basic framework for analyzing endogenous migration flows in an open economy model where countries exhibit differences in the generosity of public pension systems. Chapter 3 expands the model setting along several dimensions. First of all, I extend the model from chapter 2 to a three-country set-up, in which Germany as the host region receives immigration from Poland and Southern Europe. Furthermore, I introduce a complex demographic structure enabling an explicit analysis of the demographic transition. In contrast to related quantitative macroeconomic studies of population aging, the endogeneity of migration flows introduces a feedback mechanism between demographic and economic variables. In particular, migration responds to changes in relative wages and relative returns to the public pension systems caused by population aging. The migration flows arising in general equilibrium alter country-specific population dynamics as well as macroeconomic aggregates, factor prices and social security variables. Finally, chapter 4 shifts the focus from the interconnection between migration and population aging to the distributional implications of current labor movements. In the context of a two-country model I study the case of Polish-German migration. I highlight two main channels through which migration entails distributional effects. Firstly, labor movements change relative wages as long as they amend a country’s skill composition. Secondly, due to return migration, the savings behavior of migrants differs from that of non-migrants. Specifically, if income differences between sending and host region are significantly large and migrants expect to return to their home country with a positive probability, they accumulate high per capita savings to insure against a possible drop in income after returning. These higher assets of return migrants unambiguously increase the capital intensity in Poland (sending country). Whether Germany (host country) also benefits from the migrants’ savings behavior depends on the degree of cross-border investments.
Essays in macroeconomics: monetary policy, interest rate spreads, and financial markets
(2017) Herrmann, Fabian; Winkler, Roland; Linnemann, Ludger
Financial assets, fiscal policy, and the macroeconomy
(2016) Wittmann, Nils; Linnemann, Ludger; Winkler, Roland
In this thesis, I provide several essays in support to answering the question about the interaction of different fiscal instruments, macro aggregates, and financial assets. To discover the impact of fiscal policy and other shocks on macro aggregates, I present five essays on financial assets, fiscal policy and the macroeconomy while estimating empirical models using U.S. data and building theoretical economies.
A macroeconomic perspective on asset returns and liquidity premia
(2014-07-17) Niestroj, Benjamin; Linnemann, Ludger; Schabert, Andreas
The essays to be comprised in this thesis are approaches to the problem of modeling the notion of aggregate liquidity as a potential driver of asset returns and of macroeconomic dynamics. The main thrust of this work is empirical, using methods ranging from econometric studies of the interconnection between asset returns and their degree of liquidity to estimating dynamic stochastic general equilibrium models with Bayesian methods to establish evidence for the effectiveness of quantitative easing policies. In general, liquidity refers to the ease of trading an asset and to an asset’s ability to be sold without having to accept a considerably large drop in the price or value. Therefore, bid-ask spreads are a common measure for an asset’s degree of market liquidity. Authors like Canzoneri et al. (2013) point out that U.S. Treasuries might carry a liquidity premium which is induced by nonpecuniary returns to investors. Specifically, U.S. Treasuries are used to facilitate transactions in a number of ways: they serve as collateral in financial markets, banks hold them to manage the liquidity of their portfolios, individuals hold them in money market accounts that offer checking services, and importers and exporters hold them as transaction balances. Krishnamurthy and Vissing-Jorgensen (2012) formalize the notion that the investors obtain such liquidity services by assuming that holding U.S. Treasury securities directly contributes to their utility. The essays presented in Chapter 2 and Chapter 3 of this thesis investigate whether there is empirical evidence for household preferences where liquidity services are gained not only from U.S. Treasuries but from a variety of liquid assets. Chapter 2 investigates whether an asset pricing model which is based on such investors’ preferences can contribute to explain observed corporate-U.S. Treasury yield spreads. Chapter 3 seeks to provide a complete specification and parameterization of a utility function with liquidity services. This is done by providing a set of microfoundations, ranging from nonparametric hypothesis tests of revealed preference conditions for utility maximization, to parameter estimates for suitable specifications of utility functions. Chapter 4 (coauthored with Andreas Schabert and Roland Winkler) employs a monetary dynamic stochastic general equilibrium (DSGE) model to identify the effects of the U.S. Federal Reserve’s (Fed) large-scale longer-term Treasury purchase program (LSAP 2) on the U.S. economy. In this model a bank sector relies on liquidity services which are gained from holdings of government bonds when providing financial intermediation between households and firms. Chapter 5 investigates whether liquidity premia can explain deviations from uncovered interest parity (UIP). For that purpose forward premium regression models are modified by assuming that investors value U.S. Treasuries’ liquidity services which are induced by the U.S. dollar’s role as a key currency. Chapter 6 concludes the thesis.
Essays on expectation formation, inflation dynamics, and monetary policy
(2011-12-15) Goecke, Henry; Linnemann, Ludger; Schabert, Andreas
This thesis presents five essays that compare rational-inattentiveness models and sticky-information models with rational-expectations models in several respects. Assumptions about rationality in both types of models are tested for, implications derived from rational-inattentiveness models are investigated, models' accuracies are evaluated, predicted information acquisition behavior is tested, and assumptions about information costs are inspected. Chapter 2 presents an empirical test of the two different concepts of rationality underlying rational-expectations models and rational-inattentiveness models. The results support the concept used in rational-inattentiveness models. Chapter 3 tests implications of rational-inattentiveness models with respect to forecasting macroeconomic variables. Rational-inattentiveness models predict a negative correlation between the amount of news and the forecast deviation. A negative correlation between news coverage and forecast deviation occurs empirically for inflation whereas a positive correlation is found in the context of unemployment. A comparison between the sticky-information and the sticky-price Phillips curve is made in Chapter 4. The overall results of the empirical performances allow no clear distinction between the two concepts. However, if one is predominantly interested in matching unconditional moments of inflation dynamics, sticky prices should be used. Researchers who focus on co-movements of inflation with demand will obtain better results applying sticky information. In Chapters 5 and 6, the information acquisition behavior predicted by rational-inattentiveness models and the assumptions about information costs in these models and in rational-expectations models are tested in an experimental environment. The overall results in Chapter 5 indicate that the prediction of information acquisition derived from rational-inattentiveness models cannot be rejected. The analysis in Chapter 6 shows that assumption about information costs of the rational-inattentiveness models cannot be rejected in contrast to the assumptions in rational-expectations models.

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