UC Santa Cruz

This dissertation studies topics of international economics, such as the impact of US monetary policy on trade and finance in emerging market economies, impact of trade, migration and finance in influencing consumption across 50 states in the United States, and healthcare costs and choices in a developing economy (India). Each chapter of the dissertation approaches one of these three topics.

The first chapter investigates the role of US dollar as the dominant currency in world trade and finance and its impact on emerging market economies. In response to a U.S. monetary tightening, I show that exports of emerging market economies (EMEs) fall, contrary to the implications of standard open economy models. To explain this puzzle, I construct a DSGE model that incorporates two important aspects of the global economy; a large share of trade volumes among EMEs are denominated in US dollars and firms in EMEs borrow in US dollars. These key features of the model, along with imported inputs in production and financial frictions (a Bernanke-Gertler-Gilchrist style financial accelerator), lead to inefficient current account imbalances. In this paper, I assess the impact on the external balancing mechanism as propounded by Mundell Fleming model through a three-country general-equilibrium model with nominal rigidities, imperfect competition in production, dominant currency pricing and financing, incomplete and imperfect asset markets.

The second chapter examines how frictions in bilateral economic linkages shape the consumption pattern across economies. Using state-level data from the US, we find that the degree of bilateral consumption risk sharing across economies decreases in geographic distance. To explain this novel fact, we develop a DSGE model that incorporates trade, migration, and finance as channels of risk sharing which are subject to frictions that covary with distance. Calibrated to the US data, the model not only enables us to quantify the magnitude of the frictions in each channel, but also allows us to examine the interplay among the channels and disentangle their effects on the level, volatility, and comovement of consumption across states. Counterfactual analyses based on the model shed light on the design of macroeconomic policies that aim to reduce cross-region consumption disparity.

In the third and last chapter, we use survey data for 500 individuals from 10 villages distributed around the town of Nabha in Punjab, India, to examine patterns of healthcare choices. In particular, we examine the choice between government and private providers, and between medical professionals and informal practitioners. We also examine the joint choice of provider type and distance traveled, and possible factors influencing reported satisfaction levels with the care received. We construct a measure of anticipated treatment cost, and find that this variable, as well as reported cost-sensitivity, affects the choice between government and private providers. Our results have possible implications for policies with respect to the supply of healthcare options and their funding.