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Title: Essays in macroeconomics
Author: Redl, Christopher
ISNI:       0000 0004 7962 3656
Awarding Body: Queen Mary, University of London
Current Institution: Queen Mary, University of London
Date of Award: 2015
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This thesis explores macroeconomic issues broadly relating to monetary policy. The first chapter studies how the monetary authority should respond to shocks when labour productivity depends on past levels of employment (learning by doing). In this context, the appropriate inflation-output trade-o is between inflation today and the present value of deviations in the output gap. I find that learning induces an increase in the importance of the output gap under a cost-push shock for the (more realistic case) of a distorted steady state. The welfare costs of business cycles are shown to be significantly larger even under the optimal policy. The second chapter introduces noisy news shocks into a model of exchange rate determination to study the importance of these shocks in explaining deviations from uncovered interest parity (UIP). Agents in the foreign exchange market make decisions with imperfect information about economic fundamentals driving interest rate differences across currencies in that they must rely on a noisy signal of future interest rates. Results show that noise shocks are roughly twice as important as news shocks in explaining UIP deviations, with the impact of noise shocks being more pronounced during periods of changing monetary policy. The third chapter develops a new index of economic uncertainty for South Africa for the period 1990-2014 and analyses the macroeconomic impact of changes in this measure. The index is constructed from three sources: (1) forecaster disagreement, (2) a count of international and local newspaper articles discussing economic uncertainty in South Africa and (3) mentions of uncertainty in the quarterly economic review of the South African Reserve Bank. The uncertainty index is a leading indicator of a recession. An unanticipated increase in the index is associated with a fall in GDP, investment, industrial production and private sector employment. Contrary to evidence for the U.S.A and U.K., uncertainty shocks are inflationary. These results are robust to controlling for consumer confidence, a corporate credit spread proxy as well as global risk shocks (VIX index).
Supervisor: Not available Sponsor: Queen Mary, University of London ; Royal Economic Society ; Economic Research Southern Africa
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Economics and Finance