UC Santa Cruz

This research analyzes efficacy of the macroeconomic policies and the role of policymakers to deal with a recessionary case. In particular, it focuses on the instruments policymakers have in hand to stimulate the economic activity. It does the quantitative multiplier analysis for economies with various forms of financial market imperfections to provide a greater degree of realism into macroeconomic modeling. The first chapter analyzes efficacy of a fiscal policy tool, a tax cut in particular, in a liquidity trap scenario where monetary expansion is ineffective. It basically answers a question, as to when the zero-lower-bound is binding and the conventional monetary policy is not working, whether the discretionary fiscal policy is really ineffective as has recently been argued. The second chapter focuses on unconventional monetary policy in a closed economy and researches a question as to whether certain assumptions regarding constraints and rigidities amplify or mitigate the macroeconomic or real effects of unconventional monetary policy. The third chapter examines the macroeconomic effects of a social security reform. It analyzes contributions from different forms of changes; quantifies the macroeconomic implications of various reforms. Scenario analysis reveal positive effects for labor supply, capital stock and output to the reform implemented.