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Essays in Applied Macroeconomics
Pestova, Anna ; Kapička, Marek (advisor) ; Lenza, Michele (referee) ; Uras, Burak R. (referee)
This Thesis studies the role of domestic and foreign credit shocks in aggregate fluctua- tions and how households respond to those shocks. The first chapter explores the role of credit in shaping aggregate fluctuations in a panel of advanced and emerging countries. We decompose total credit by aggregate shocks and by borrower type. We establish that the overall boom-bust recession response to bank credit is due to exclusively household credit expansions, primarily when these expansions are driven by shocks to aggregate demand. In contrast, corporate credit expansions exhibit no boom-bust effects and immediately increase the risk of recession, and this increase is mainly driven by shocks to credit supply. The second chapter analyzes the transmission of credit supply shocks to household balance sheets and labor market outcomes. We leverage differences in credit conditions across U.S. states and compare household outcomes of the population residing in states that witnessed credit conditions easing of various intensities. We show that positive credit shocks lead to greater household defaults in the future if they increase the household mortgage-to-income ratio. We document that positive credit supply shocks induce (i) shifts of employment between the tradable and non-tradable sectors, (ii) changes in...
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Organization of knowledge and taxation
Kapička, Marek ; Slavík, Ctirad
This paper studies how labor income taxation interacts with the organization of knowledge and production, and ultimately the distribution of wages in the economy. A more progressive tax system reduces the time that managers allocate to work. This makes the organization of production less efficient and reduces wages at both tails of the distribution, which increases lower tail wage inequality and decreases upper tail wage inequality. The optimal tax system is substantially less progressive than the current one in the United States. However, if wages were exogenous, the optimal tax progressivity would be much higher.
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Macro-Epidemic Modelling: A Deep Learning Approach
Žemlička, Jan ; Slavík, Ctirad (advisor) ; Kapička, Marek (referee)
I develop a novel method for computing globally accurate solutions to recur- sive macro-epidemic models featuring aggregate uncertainty and a potentially large number of state variables. Compared to the previous literature which either restricts attention to perfect-foresight economies amendable to sequence- space representation or focuses on highly simplified, low dimensional models that could can be analyzed using standard dynamic programming and linear projection techniques, I develop a deep learning-based algorithm that can han- dle rich environments featuring both aggregate uncertainty and large numbers of state variables. In addition to solving for particular model equilibria, I show how the deep learning method could be extended to solve for a whole set of models, indexed by the parameters of government policy. By pre-computing the whole equilibrium set, my deep learning method greatly simplifies compu- tation of optimal policies, since it bypasses the need to re-solve the model for many different values of policy parameters. 1
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Macroeconomic policy during the coronavirus epidemic
Kapička, Marek ; Kejak, Michal ; Slavík, Ctirad
This paper summarizes the relevant economic literature to date, combining SIR models and macroeconomic models and discussing the consequences of the pandemic for fiscal and monetary policy. SIR models imply that our fight against the pandemic will only succeed if we are able to achieve a long-term reduction of the reproduction number. Macroeconomic epidemiological models highlight the mutual interaction between the spread of the infection and human economic behaviour. They show that there is a negative relationship between the depth of the economic recession and the rate at which the epidemic spreads. They also reveal that the epidemic creates negative externalities implying that spontaneously limiting activities is an inadequate response. The economic consequences of the pandemic are modelled as a mixture of supply and demand shocks, it is not entirely clear which type of shock will dominate. While the negative supply shock came first, the demand shock may end up dominating because certain sectors are hit harder than others. The macroeconomic literature also points out that the pandemic affects different groups of people to different extents: for example, quarantine measures affect young people and people with lower incomes more than others. The epidemic thus has significant consequences for the redistribution of income and consumption. In brief: governments' primary task is to implement public health measures that can flatten the epidemic's curve sufficiently to ensure that the health crisis connected with the spread of the coronavirus does not exceed the capacity of the given country's health system. These measures will necessarily contribute to worsening the economic crisis. During this stage of the crisis, in which fiscal policy plays an essential role, it is necessary ‚to do whatever it takes' to maintain the majority of the economy in a viable state. Monetary policy will play only a secondary role during this phase. The longer and more serious the health crisis, the worse the economic crisis will be: it may also start to manifest itself in the form of a financial crisis, exchange rate crisis etc., which may then demand more drastic fiscal policy measures and greater coordination between fiscal and monetary policies. This pandemic and the economic crisis it has given rise to are global crises. They cannot therefore be overcome in isolation in one country or another, but demand coordinated efforts from the most developed countries and proper aid for the less developed countries, with the international and supranational institutions (IMF, WB, ECB, EU and others) playing a substantial role.\n
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