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Title: Investigating the impacts of macroeconomic shocks on the economy : a sign-restriction approach
Author: Saeidinezhad, Elham
Awarding Body: University of Sheffield
Current Institution: University of Sheffield
Date of Award: 2013
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We investigate the effects of different sets of shocks on different economies in this thesis. First we study 'contractionary' monetary shocks by imposing sign restrictions on the impulse responses of macroeconomic variables for 6 different economies namely Japan, UK and the US as well as Malaysia, Mexico and South Korea. We show that i) the effect of an adverse monetary policy shock on industrial production is ambiguous; ii) there is price puzzle for Japan and UK which we conjecture as an outcome of excessive bank lending and poor regulation but not of passive monetary policy; iii) there is delayed overshooting puzzle for Japan and the exchange rate puzzle for the UK and the US. For the case of developing countries, we find evidence of delayed overshooting of the exchange rate and evidence of price puzzle for Mexico. This thesis also compares the dynamic effect of fiscal policy on macroeconomic variables implied by a substantial class of DSGE models with the empirical results from imposing sign restriction for Italy and the UK. We observe that private consumption and output increase after an 'expansionary' spending shock. This is in a sharp contrast with neoclassical theories such as real business cycle (RBC) model that presumes consumers behave in Ricardian manner. A 'contractionary' fiscal policy, whether it is revenue or an expenditure shock, induce a recessionary impact on the economy. Therefore while we find support for the conventional Keynesian models, RBC and some variants of this model are naive to explain the behavior of private consumption and wages after a fiscal policy shock. Finally in this thesis we attempt to shed new light on the dynamic impacts of government spending and technology shocks on the real exchange rate for the Euro area. The main idea under this identification scheme is to let the data speak about the behaviour of the interested variables. Moreover, this thesis investigates the impacts of fiscal policy and technology shock jointly in contrast to most of the literature which just focuses on one shock only. Our investigation suggest that the real exchange rate appreciates (falls) following an expansionary fiscal shock. It appreciates in response to a positive technology shock as well however after an on impact depreciation (increase) which lasts for 8 quarters.
Supervisor: Caglayan, Mustafa ; Mouratidis, Kostas Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available