Essays in Empirical Macroeconomics

This dissertation is composed of three essays exploring the macroeconomic consequences of shifts in beliefs about the housing market and changing national security risks. In chapter one, I examine the causal effect of house price expectations on individuals' spending decisions using a survey-based experiment. In the survey, respondents were randomly divided into two groups to receive different professional forecasts of future house prices. Exploiting this information treatment as an exogenous source of variation in house price expectations, I show that a one percentage point increase in nationwide house price expectations over the next 12 months leads to about a 0.4 percentage point increase in intended total household spending growth over the same period. This effect is likely driven by an expected increase in housing wealth. I provide evidence that individuals consider the increase in housing wealth as relaxing their borrowing constraints. In chapter two, I investigate the relationship between individuals' house price expectations and their spending intentions using microdata from the New York Fed Survey of Consumer Expectations and the Michigan Survey of Consumers. The results suggest that people who expect house prices to rise express greater readiness to increase their household spending and their spending on durable goods. This paper also shows that a positive innovation in house price expectations is followed by an increase in aggregate consumption using a structural VAR model. In the final chapter, I examine the impact of national security threats on a nation's economic growth and fiscal policy based on a case study of the Korean peninsula. The results show that the overall impact of North Korean provocations on South Korea's short-run economic growth is negligible, but provocations had a significant impact on South Korea's economic growth during 1960-1970 and 1992-1997 when inter-Korean tensions were high. This paper provides some evidence that South Korea's military spending and precautionary saving motive are key channels through which provocations generate these effects.