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Three Essays in Macroeconomics

thesis
posted on 2012-04-19, 00:00 authored by Julio Garín
This dissertation studies the U.S. business cycle as well as its housing market. While there has been a vast literature that has tried to explain and account for the short-run fluctuations in aggregate economic activity, several features of business cycles in the United States business are not well understood yet. In addition, the 2008 financial crisis showed the extent to which the housing market can affect macroeconomic aggregates. The three essays that compose this dissertation address these issues. The 2008 financial crisis has highlighted the need for a better understanding of the extent to which financial frictions can affect macroeconomic aggregates. With the hypothesis that financial frictions that manifest themselves as borrowing constraints can play an important role in the capacity of firms to create new jobs, the first essay studies the effects of imperfections in the financial sector on the cyclical properties of unemployment and job creation. The second chapter is joint work with Michael Pries and Eric Sims. In the study, we document some important changes at business cycle frequencies that have occurred in the US since the mid-eighties. While some of those changes have been already documented, we are the first to argue that these changes are related to each other and as such, they should be explained within the same theoretical framework. We do so by providing a model of labor reallocation and we demonstrate that a decline in the importance of aggregate shocks relative to reallocative shocks can simultaneously account for the documented facts. Motivated by the high mortgage default rates observed during 2007-2008, particularly in nonrecourse states, the last chapter examines how the existence of nonrecourse debt in the mortgage market influences the default and the decision of homeowners to rent or own. By developing a life-cycle model in which those decisions are endogenously determined, I provide a framework that can account for recent empirical evidence that suggests that the degree of recourse has an important impact on default rates. I find that the presence of mortgage recourse reduces the incentives of ownership increasing, considerably, the proportion of liquid wealth in agent's portfolios.

History

Date Modified

2017-06-02

Defense Date

2012-03-28

Research Director(s)

Michael J. Pries

Committee Members

Eric Sims Thomas Cosimano

Degree

  • Doctor of Philosophy

Degree Level

  • Doctoral Dissertation

Language

  • English

Alternate Identifier

etd-04192012-094725

Publisher

University of Notre Dame

Program Name

  • Economics

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