Alumni Dissertations and Theses

 
 

Alumni Dissertations and Theses

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  • A Summary of Some Estimators of Dynamic Panel Data Models and Their Applications

    Author:
    Zhen Ma
    Year of Dissertation:
    2012
    Program:
    Economics
    Advisor:
    Michael Grossman
    Abstract:

    Abstract A SUMMARY OF SOME ESTIMATORS OF DYNAMIC PANEL DATA MODELS AND THEIR APPLICATIONS by Zhen Ma Advisor: Professor Michael Grossman This thesis consists of two chapters. Chapter one summarizes three estimators of dynamic panel data models: Generalized Method of Moments (GMM) with fixed effects, Wooldridge Conditional Maximum Likelihood (CML) with random effects and a Maximum Simulated Likelihood (MSL) random effects dynamic probit. Chapter two presents their applications and empirical findings. I examine the impact of the large price increases in cigarettes after the Master Settlement Agreement (MSA) on drinking behavior using data from the Panel Study of Income Dynamics (PSID). Alcohol consumption, drinking participation and heavy drinking participation (three or more drinks per day) are considered for the full sample, as well as for sub-samples stratified by age group and gender. Estimation results are relatively stable across estimators. I find that the cross-price effects of cigarettes on alcohol consumption are insignificant showing that averaging on all consumption levels, the number of drinks consumed per day is not affected by the increases in cigarette prices; and that the cross-price effects of cigarettes on drinking participation are mostly positive and significant, indicating drinking is an economic substitute for smoking; also, cigarette prices do not affect heavy drinking prevalence.

  • Essays on Exchange Rate Pass-Through

    Author:
    Michael Malenbaum
    Year of Dissertation:
    2015
    Program:
    Economics
    Advisor:
    Sangeeta Pratap
    Abstract:

    This dissertation examines the degree to which the prices of imports to the United States respond to changes in bilateral exchange rates. The first chapter provides a review of the literature on exchange rate pass-through and outlines how research on the topic has changed over the past forty years. The next two chapters focus individually on specific questions that are important to the pass-through literature. These topics include the impact of imperfect competition and varying market shares on pass-through rates, as well as the decline in pass-through to import prices and the possible effects of China's increased role in trade with the United States. In each case, I use highly disaggregated data on US imports to calculate pass-through rates and examine competition at the most detailed possible level.

  • Smoking, Drinking, and Binge Drinking: An Empirical Study of the Role of Price on Consumption by High School Seniors

    Author:
    Jorge Medina
    Year of Dissertation:
    2011
    Program:
    Economics
    Advisor:
    Michael Grossman
    Abstract:

    In this study, I estimate time-series demand functions using Ordinary Least Squares in order to examine the effects of real cigarette and alcohol prices on their respective consumption. My targeted population is high school seniors in the United States. The data I use come from Monitoring the Future, The Tax Burden on Tobacco, and the Bureau of Labor Statistics. Using the Ordinary Least Squares real price coefficients, I evaluate how much of the observed change in consumption is explained by the observed change in real price during a particular period of time between 1976 and 2008. Then, I repeat the same calculations for subsamples of male, female, white, and nonwhite high school seniors. Moreover, I incorporate a risk variable measuring whether or not subjects believe there is a great risk of harm when consuming cigarettes or alcohol in moderate or excessive quantities. Among high school seniors, my findings reveal that 73 percent of the observed decrease in cigarette consumption during 1997-2008, 28 percent of the observed decrease in alcohol consumption during 1989-1992, and 70 percent of the observed decrease in excessive alcohol consumption also during 1989-1992 are explained by increments in their respective real prices. The percentage of change in cigarette, alcohol, and excessive alcohol consumption explained by changes in their respective real prices remain substantial even after controlling for risk perceptions associated with these activities. Furthermore, greater awareness of the risks associated with smoking, drinking, and binge drinking strengthen the effect of real price on consumption.

  • Essays on the Impact of Carry Trade Activity on Exchange Rate Movements & Market Volatility

    Author:
    Takvor Mutafoglu
    Year of Dissertation:
    2010
    Program:
    Economics
    Advisor:
    Merih Uctum
    Abstract:

    Average daily turnover in FX markets were raised to $1.9 trillion in April 2004, a rise of 54% at current exchange rates and 36% at constant exchange rates. One of the reasons for such a strong growth in turnover is carry trading where investors borrow money in a currency with low interest rates in order to invest in a currency with higher interest rates. The first part of this thesis re-examines the relationship between the yen carry trade activity and the related financial variables. Although a recent study, employing structural vector autoregression methodology, finds that the U.S. stock market performance has a dominant impact in the activity of the speculative yen carry trade using monthly data, I illustrate that this finding is not robust when weekly data is introduced to the same methodology. Instead, I find that it is the fluctuations in the Japanese yen against the U.S. dollar exchange rate, rather than the interest rate spread between the two countries and the U.S. stock market performance, that determines the direction of the yen carry trade. The second part of the thesis investigates the role of carry trade transactions on exchange rate behavior since these transactions change the supply and demand for currencies initiated by the opportunity to exploit interest rate differentials. The net position of speculators in different currency futures are used as an indicator for carry trade activity. By employing vector autoregression methodology, the results indicate that exchange rates react instantaneously to shocks in speculators' positions and Granger causality tests suggest that these positions lead to price discovery in the spot market for exchange rates. Furthermore, out-of-sample forecasts perform better than the random walk model for three of the five currencies in our sample based on root mean square and mean absolute error forecasting evaluation criteria. The last part investigates the dynamic lagged relationship between trading activity in currency futures and exchange rate volatility in the spot market using the net positions of trader in various currency futures markets. I use weekly high-low estimate of volatility, historical volatility, and conditional volatility from the GARCH (1, 1) process. The results point that in most cases while speculators and small traders in currency futures increase volatility in the corresponding spot markets, hedgers seem to decrease it as indicated by generalized impulse response functions. Also, in most of the cases, speculators' demand for futures increase in response to increased volatility in the spot market meanwhile hedgers' demand decrease.

  • Essays on Firm Behavior

    Author:
    Priya Nagaraj
    Year of Dissertation:
    2012
    Program:
    Economics
    Advisor:
    Sangeeta Pratap
    Abstract:

    The Indian economy has received considerable interest in economic research in the last decade. Economic liberalization, greater participation in world trade and the availability of long panel of firm level data has encouraged empirical work on the Indian economy. My research adds to this growing empirical literature on the behavior and performance of Indian firms post liberalization. This thesis comprises three chapters. In the first chapter, I provide a brief summary of reforms in India, review some of the papers analyzing firm behavior and performance and put it in the perspective of the liberalization process in India. The literature on Indian liberalization and on various aspects of firm behavior and performance is plentiful. I have limited my review to the papers which have influenced my research. In the second chapter, I analyze the relationship between financial constraints faced by the Indian manufacturing firms and their export participation decision. I find that the firms that enter the export market are financially healthier than the firms that cater only to the domestic market. I also verify that financial health is the cause and not a consequence of exports. In the last chapter, I address the relationship between firm size and its total factor productivity in the Indian manufacturing industries (co-authored with Prabal De). While small firms have the advantage of smaller and more flexible management and lower response time to market changes, larger firms have advantages of economies of scale, political clout and better access to government credits, contracts and licenses, particularly in developing countries. We find that small Indian firms are more productive than their larger counterparts.

  • Essays on the Impacts of the "Great Moderation" on Business Cycle Modeling

    Author:
    Andre Neveu
    Year of Dissertation:
    2009
    Program:
    Economics
    Advisor:
    Merih Uctum
    Abstract:

    The research presented here is a comprehensive analysis of research on the "Great Moderation" and its impact on business cycle modeling. In the presence of a less volatile aggregate economy, the methods of modeling business cycles have fundamentally changed along with the ability to detect turning points in the business cycle using standard algorithms. Chapter One lays out the historical case for modeling the business cycle in a manner placing importance on the ability of a model to replicate features observed in actual GDP data, such as the depth and length of recessions, or the average height of expansions. Chapter Two compares different business cycle models by their ability and accuracy in reproducing features of observed GDP data in simulated Monte Carlo paths. Comparisons are made by examining how volatility moderation affects business cycle modeling for the U.S., U.K., and Australia. Univariate ARIMA, structural change, and Markov-switching ("MS") models are estimated and used to simulate time paths using Monte Carlo methods. These results generally support previous findings that MS models are superior to linear models and comparable to structural change models at fitting business cycle characteristics. Tests show that to replicate business cycle characteristics, MS models must account for independent shifts in mean and volatility parameters. Substantial new evidence shows that commonly specified MS models with a simple linear structure, constant variance, or state-dependent volatility are sub-optimal and should be avoided in practice. Results indicate that models attempting to replicate business cycle features in any series should consider the importance of how volatility is modeled prior to estimation. Evidence is also presented showing that the Great Moderation may have recently ended. Chapter Three examines algorithm robustness used to conclude that independent switching models are better able to replicate business cycle features. Robustness is tested by varying the parameters of dating algorithms used to detect turning points. Evidence shows that the "window" and "censor" used for turning point selection criteria does not lead to substantial changes in the conclusions of our previous findings implying that our results are not artifacts of the algorithm, but due to the actual economic model itself.

  • Governance and Merger Activity in Banking

    Author:
    Thomas Piskula
    Year of Dissertation:
    2011
    Program:
    Economics
    Advisor:
    Gayle DeLong
    Abstract:

    One method of evaluating the success of management decisions regarding acquisitions is to examine equity price movements as the news of the merger is made public. The price movement of the acquiring firm's equity around the announcement of the acquisition indicates if shareholders believe management has acted in their interest. In the banking industry, researchers have found that on average equity values of the acquiring bank do not display abnormal positive returns upon announcement, and often display statistically significant negative returns. Another line of research has documented that CEOs are better compensated for managing larger organizations, particularly when involved in merger activity. This study investigates the possibility of a linkage between weak firm-level corporate governance structures at banks and their propensity to make acquisitions that produce negative reactions from equity holders. A commercially-sold governance index from Institutional Shareholder Services is used to measure governance strength. Acquisition events are from the comprehensive Thomson Reuters SDC merger database and equity values are from CRSP. I find that weaker corporate governance is associated with inferior stock market reactions upon announcement of an acquisition. This result should be of interest to regulators as they monitor corporate actions for covert motives, and to investors in their investment selection process. I then explore which aspects of corporate governance have the most significant connection to the equity market reception. Surprisingly, a parsimonious index of two factors has the explanatory power of the 55 available governance attributes in this bank merger context. I also show that in this dataset, which is composed of US banks purchasing US entities, acquirers with stronger (weaker) governance have a propensity to select targets with stronger (weaker) governance. Lastly, for cases in which the target firm is a bank that is publicly held or that has an ultimate parent that is publicly held, I investigate whether good governance at the target or its parent is associated with more positive movement of the acquirer's equity price at the time of the merger announcement. The results are robust to the use of a bank sector market index in place of the overall market index.

  • ESSAYS ON INCOME DISTRIBUTION

    Author:
    Yan Qin
    Year of Dissertation:
    2009
    Program:
    Economics
    Advisor:
    Michael Grossman
    Abstract:

    Three papers comprise this dissertation. The first reexamines the relationship between the urbanization and the income inequality of the total China's residents. We start from the question whether the change of the income inequality of China's residents follows the Kuznets's Inverted-U hypothesis. Although the change of the income inequality inside the rural area and urban area doesn't follow the Kuznets's Inverted-U hypothesis, according to our research, the change of the income inequality of the total residents supports the Kuznets's Inverted-U hypothesis. The most important cause resulting in the change of the income inequality of the total residents appearing the inverted-U is that the change of the income inequality caused by urbanization has entered the decreasing phase during the recent years, which makes the income inequality of the total residents begin to decrease, or makes its increasing speed begin to decrease gradually. In the future, for decreasing the income inequality of the total residents, the two kinds of the polices will be provided: on the one hand, the barrier which block the shift of the labor from the rural area to urban area must be broken, and the urbanization should be accelerated; on the other hand the income of the rural residents must be improved as soon as possible, the urban-rural gap will shrink. The second paper more closely examines the main factors influencing income inequality of urban residents in China. Recently, the continuing enlargement of urban residents' income inequality in China has caused much concern from society, among which, the discussion on main factors leading to deteriorating income inequality becomes the focus of income distribution research. The author of this thesis uses two methods to reveal the contribution of urban population characteristics to income inequality based on the sampled data collected by Investigating Team of Urban Society and Economy of Tianjin from 3000 households in 2004.It shows that occupation or duty, education and industry differences are the three main factors effecting urban residents' income inequality, and they contribute up to 40% of urban residents' income differences. Specifically, surpassing industry features, the features of occupation or duty become the most significant factors influencing income, followed by the factors of education levels, and industry features retreat to be the least import among the three ones. Accordingly, the author proposes his suggestions to the adjustments of urban residents' income distribution, namely, the principle of "Controlling Two Ends of Income Ranks, and Increasing the Number of Residents with Intermediate Income". In other words, a diamond-shaped income distribution system should be established by improving the condition of low-income residents and limiting the expansion of high-income stratum, and finally, enlarging the group in between. The third paper studies education and environment in China. The paper uses two-stage Durbin method to analyze Chinese economic growth, we find that in China, labor market has redundant and labor elasticity of GDP is negative. Physical capital investment has wrong direction and physical capital elasticity of GDP is negative also, the reasons of GDP growth are human capital and "pollution". So, if China plans to make a harmonious society, achieves its GDP target and control "environment", the only way is increasing human capital investment to support China's sustainable and green growth. We find China faced a policy dilemma between economic growth and environment. At the conclusion, we give following three suggestions: Increase investment in human capital, protect intellectual property right and privatization property right, "One Family, One Car" policy.

  • The Financial Accelerator and Fixed Asset Investment

    Author:
    Heather Roberts
    Year of Dissertation:
    2011
    Program:
    Economics
    Advisor:
    Thom Thurston
    Abstract:

    The foundation of this paper is the theory of the financial accelerator. The implication of the financial accelerator is that small firms have less access to debt than do large firms, and this difference is greater during recessions. Therefore, smaller firms are at a disadvantage during recessions, and this disadvantage can have significant and long-lasting effects. This paper examines the role of credit and the effect on fixed asset investment over the business cycle. The results confirm that there is a shift in credit from small firms to large firms during recessions, and, more specifically, that banks shift short-term debt from small to large firms. The main contribution of this paper to the work on financial accelerators is the focus on fixed asset investment. The results show that a positive shock to the Federal Funds Rate has no impact on large firms' fixed asset investment; however, a positive shock to the Federal Funds Rate negatively impacts the smallest firms' fixed asset investment five quarters after the shock occurs. During monetary tightening, small firms' fixed asset investments are more negatively impacted than are large firms' fixed asset investments, and this discrepancy is partially explained by access to credit.

  • ESSAYS ON SAVINGS BEHAVIOR OF LOW-INCOME HOUSEHOLDS IN COLOMBIA

    Author:
    Luz Salas
    Year of Dissertation:
    2014
    Program:
    Economics
    Advisor:
    Jonathan Conning
    Abstract:

    I designed and implemented a Randomized Controlled Trial to study whether relatively simple modifications to how a commitment savings product was framed and labeled could affect savings accumulations and other outcomes of low-income individuals in newly formed Village Savings and Loan Associations (VSLAs) in Colombia. Motivated by hypotheses from behavioral economics, the experiment tests hypotheses that behavioral responses should vary depending on whether subjects are led to label and create `mental savings accounts' in private or public ways. Individuals in the private-labeling treatment groups were led to label their savings as earmarked for a particular purpose and to state savings accumulation targets, information which was shared only privately with a member of the research team. Individuals in the public-labeling treatment groups received the same intervention but were then asked to publicly reveal and announce their chosen goals to other members of their savings group. The average treatment effects of the public-labeling intervention are very strong and significant. Savings accumulations increased by an average of 35% and savings goals were 8.5% more likely to be reached in comparison to those untreated. Further explorations strongly suggests evidence of differentiated behavioral responses of individuals in the private-labeling treatment group: private commitment to a savings goal is more effective for individuals who, after random assignment but prior to the intervention, had been measured to be less constrained by economic circumstances and institutional barriers. The analysis and interpretation of results was enriched by mixed methods for data collection: households' survey data, administrative records and qualitative data from focus groups discussions. Chapter 1 described the type of individuals that, being offered the option, decide to participate in VSLAs. Chapters 2 and 3 show how the interventions affect savings and other behaviors of individuals that participate in the interventions.