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Structural models with no solution are incoherent, and those with multiple solutions are incomplete. We show that models with occasionally binding constraints are not generically coherent. Coherency requires restrictions on the parameters or on the support of the distribution of the shocks. In presence of multiple shocks, the support restrictions cannot be independent from each other, so the assumption of orthogonality of structural shocks is incompatible with coherency. Models whose coherency is based on support restrictions are generically incomplete, admitting a very large number of minimum state variable solutions.

The instability of macroeconomic variables is usually ruled out by rational expectations. We propose a generalization of the rational expectations framework to estimate possible temporary unstable paths. Our approach yields drifting parameters and stochastic volatility. The methodology allows the data to choose between different possible alternatives: determinacy, indeterminacy and instability. We apply our methodology to US inflation dynamics in the '70s through the lens of a simple New Keynesian model. When unstable RE paths are allowed, the data unambiguously select them to explain the stagflation period in the '70s.Thus, our methodology suggests that US inflation dynamics in the '70s is better described by unstable rational equilibrium paths.

This paper proposes a minimal test of two basic empirical predictions that ag-gregate data should exhibit if sticky prices were the key transmission mechanism of monetary policy, as implied by the benchmark DSGE-New Keynesian models. First, large monetary policy shocks should yield proportionally larger initial re-sponses of the price level and smaller real effects on output. Second, in a high trend inflation regime, prices should be more flexible, and thus the real effects of monetary policy shocks should be smaller and the response of the price level larger. Our analysis provides some statistically significant evidence in favor of a sticky price theory of the transmission mechanism of monetary policy shocks.

A natural generalisation of the original Leeper (1991) taxonomy leads to the concepts of globally active (or passive) and globally switching policies to explain the determinacy properties of a model where both monetary and fiscal policies may switch according to a Markov process. Monetary and fiscal policies need to be globally balanced to guarantee a unique equilibrium: globally active monetary policies need to be coupled with globally passive fiscal policies, and switching monetary policies with switching fiscal policies. This new taxonomy also links the determinacy analysis to the model dynamics because it qualifies under which conditions expectations and wealth effectsarise in the Markov-switching model.

This paper studies the challenge that increasing the inflation target poses to equilibrium determinacy in a medium-sized New Keynesian model without indexation fitted to the Great Moderation era. For moderate targets of the inflation rate, such as 2 or 4 percent, the probability of determinacy is near one conditional on the monetary policy rule of the estimated model. However, this probability drops significantly conditional on model-free estimates of the monetary policy rule based on real-time data. The difference is driven by the larger response of the federal funds rate to the output gap associated with the latter estimates.

The phenotypic effect of some single nucleotide polymorphisms (SNPs) depends on their parental origin. We present a novel approach to detect parent-of-origin effects (POEs) in genome-wide genotype data of unrelated individuals. The method exploits increased phenotypic variance in the heterozygous genotype group relative to the homozygous groups. We applied the method to >56,000 unrelated individuals to search for POEs influencing body mass index (BMI). Six lead SNPs were carried forward for replication in five family-based studies (of ∼4,000 trios). Two SNPs replicated: the paternal rs2471083-C allele (located near the imprinted KCNK9 gene) and the paternal rs3091869-T allele (located near the SLC2A10 gene) increased BMI equally (beta = 0.11 (SD), P, Author Summary Large genetic association studies have revealed many genetic factors influencing common traits, such as body mass index (BMI). These studies assume that the effect of genetic variants is the same regardless of whether they are inherited from the mother or the father. In our study, we have developed a new approach that allows us to investigate variants whose impact depends on their parental origin (parent-of-origin effects), in unrelated samples when the parental origin cannot be inferred. This is feasible because at genetic markers at which such effects occur there is increased variability of the trait among individuals who inherited different genetic codes from their mother and their father compared to individuals who inherited the same genetic code from both parents. We applied this methodology to discover genetic markers with parent-of-origin effects (POEs) on BMI. This resulted in six candidate markers showing strong POE association. We then attempted to replicate the POE effects of these markers in family studies (where one can infer the parental origin of the inherited variants). Two of our candidates showed significant association in the family studies, the paternal and maternal effects of these markers were in the opposite direction.

Purpose: Mutations in genes encoding proteins from the tri-snRNP complex of the spliceosome account for more than 12% of cases of autosomal dominant retinitis pigmentosa (adRP). Although the exact mechanism by which splicing factor defects trigger photoreceptor death is not completely clear, their role in retinitis pigmentosa has been demonstrated by several genetic and functional studies. To test for possible novel associations between splicing factors and adRP, we screened four tri-snRNP splicing factor genes (EFTUD2, PRPF4, NHP2L1, and AAR2) as candidate disease genes. Methods: We screened up to 303 patients with adRP from Europe and North America who did not carry known RP mutations. Exon-PCR and Sanger methods were used to sequence the NHP2L1 and AAR2 genes, while the sequences of EFTUD2 and PRPF4 were obtained by using long-range PCRs spanning coding and non-coding regions followed by next-generation sequencing. Results: We detected novel missense changes in individual patients in the sequence of the genes PRPF4 and EFTUD2, but the role of these changes in relationship to disease could not be verified. In one other patient we identified a novel nucleotide substitution in the 5' untranslated region (UTR) of NHP2L1, which did not segregate with the disease in the family. Conclusions: The absence of clearly pathogenic mutations in the candidate genes screened in our cohort suggests that EFTUD2, PRPF4, NHP2L1, and AAR2 are either not involved in adRP or are associated with the disease in rare instances, at least as observed in this study in patients of European and North American origin.

We estimate a medium-scale model with and without rule-of-thumb consumers over the pre-Volcker and the Great Moderation periods, allowing for indeterminacy. Passive monetary policy and sunspot fluctuations characterize the pre-Volcker period for both models. In both subsamples, the estimated fraction of rule-of-thumb consumers is low, such that the two models are empirically almost equivalent; they yield very similar impulse response functions, variance, and historical decompositions. We conclude that rule-of-thumb consumers are irrelevant to explain aggregate U.S. business cycle fluctuations.

This dissertation consists of three self-contained chapters which discuss topics related to production networks and goods market search in macroeconomics. Chapter 1 offers novel econometric evidence on the contribution of production networks to the effect of monetary shocks on real macroeconomic variables. Using a highly disaggregated monthly dataset on US final sectoral consumption it is estimated that 30% of the effect of monetary shocks on aggregate consumption comes from amplification through input-output linkages. Such network amplification rises in the frequency of price non-adjustment and intermediates intensity. Chapter 2 develops a general theory of state-dependent fiscal multipliers in a framework featuring two empirically relevant frictions: idle capacity and unsatisfied demand. The key novel finding is that the source of economic fluctuations determines the cyclicality of multipliers. Demand-side policies, such as government spending, have multipliers that are large in demand-driven recessions, but small in supply-driven downturns. Conversely, supply-side policies, such as cuts in payroll taxes, are ineffective in demand-driven recessions, but powerful if the downturn is supply-driven. The theoretical findings are supported by empirical evidence using US data. Finally, Chapter 3 develops a sticky-price model, where input-output linkages are formed endogenously and in a manner consistent with sectoral and firm-level data. The model simultaneously rationalizes the following observed non-linearities in monetary transmission. First, the model produces cycle dependence: the magnitude of real GDP's response to a monetary shock is procyclical. Second, there is path dependence: non-neutrality of real GDP is higher following previous periods of loose monetary policy. Third, there is size dependence: larger monetary expansions make the network denser and have a disproportionally larger effect on GDP than smaller expansions.

A common complaint about structural work in applied microeconomics is that its methods are insufficiently transparent and its findings are not robust enough (see e.g. Angrist and Pischke, 2010). This critique seems especially on target in the context of complex dynamic models with large numbers of parameters, which are the subject of this thesis. In this literature, the important consequences of seemingly technical assumptions are often opaque even to the researchers themselves. Any two researchers may make different choices about how to specify and estimate a model, leading to different results. For the most part, the target of this critique is the specification of the structural models themselves. Critics complain that models are likely to be misspecified; that they rely on unrealistic assumptions about agent knowledge and rationality; or that the model parameters are not identified given the data, even assuming that the model captures the true structure of the data generating process. These concerns have received a lot of attention in recent work: many structural models now feature deviations from full information or rationality (e.g. Abaluck and Adams-Prassl, 2021), new econometric techniques promise more transparency about the effects of identifying assumptions (e.g. Andrews, Gentzkow and Shapiro, 2017, 2020), and it is now much more common in applied work to see explicit (formal or informal) arguments about identification than it was in the 1990s. A separate issue, which has received less attention, is a lack of transparency and insufficient robustness of parameter estimates stemming from estimation procedures. Even if a model is well-specified and (point-)identified, parameter estimates may be far away from the true parameters if estimators are biased or inefficient. Furthermore, the limits of computational precision can lead to estimation ‘failures’ even when estimators would be efficient with unlimited precision. These issues are especially prominent for dynamic discrete choice models, which are particularly challenging to estimate. Achieving reasonable efficiency and robustness in the estimation of complex dynamic discrete choice models often requires substantial computational resources. This creates sharp trade-offs for applied researchers between computational costs, the accuracy of parameter estimates, and the complexity of models that can be estimated. Despite large advances in computing power, it is still common to estimate models relying on imprecise approximations, which can introduce economically meaningful bias into the parameter estimates. As a consequence, the results of counterfactual policy experiments can also be misleading. In this thesis, I propose new tools for estimating these models with a higher degree of accuracy at any given level of computational resources and model complexity. The thesis consists of this introduction, three separate research papers, and a conclusion. The first paper proposes a new technique for simulating the likelihood in finite-horizon dynamic discrete choice models with observed payoffs that makes better use of the information contained in observed payoffs to guide the simulation of choice probabilities. The second paper (with Jack Britton) proposes an extension to the Generalized Indirect Inference (GII) method of Bruins et al. (2018), which makes it practicable to estimate complex dynamic discrete choice models using GII. We illustrate our method by employing it to estimate a model of the career choices of young people in the UK, which we use to assess the long-run effects of a conditional cash transfer scheme. The third paper (also with Jack Britton) proposes three improvements to the approximate solution method of Keane and Wolpin (1994), which lead to much higher accuracy without increasing the required computation time. Unfortunately, the presentation as separate research papers means that a small amount of material is repeated across papers/chapters.

We study the effects on economic activity of a pure temporary change in government debt and the relationship between the debt multiplier and the level of debt in an overlapping generations framework. The debt multiplier is positive but quite small during normal times while it is much larger during crises. Moreover, it increases with the steady state level of debt. Hence, the call for fiscal consolidation during recessions seems ill-advised. Finally, a rise in the steady state debt-to-GDP level increases the steady state real interest rate providing more room for manoeuvre to monetary policy to fight deflationary shocks.

Rock-burst is a local instability problem affecting compact rock-masses in deep tunnels: it can generate important over-breaks, but even more, safety issues for workers in the area where it occurs. The experimental study, aimed at predicting rock-burst occurrence during the excavation of the Brenner Base Tunnel, was carried out in massive granite below an overburden of 1000-1200 m. The experiment consisted in compressing a portion of the rock-mass at the tun-nel side-wall by means of a couple of flat-jacks, measuring simultaneously the generated acoustic emissions with velocimeters and accelerometers. Recorded data clearly show a peak in the acoustic emission energy few instants before the failure of the rock-mass. This value, after careful site validation based on the continuous monitoring of acoustic emissions during the excavation, has been implemented as an alarm threshold for the interpretation of measurements and for the adoption of appropriate countermeasures.

We investigate the possibility to reflate an economy experiencing a long-lasting zero lower bound episode with subdued or negative inflation, by imposing a minimum level of wage inflation. Our proposed income policy relies on the same mechanism behind past disinflationary policies, but it works in the opposite direction. It is formalized as a downward nominal wage rigidity (DNWR) such that wage inflation cannot be lower than a fraction of the inflation target. This policy allows to dissolve the zero lower bound steady state equilibrium in an OLG model featuring “secular stagnation” and in a infinite-life model, where this equilibrium emerges due to deflationary expectations.

We show how to use Hurwitz polynomials to study the stability and uniqueness of Rational Expectation equilibria in Dynamic General Equilibrium models. We apply this method to a model characterized by staggered wage and price contracts and by limited asset market participation (LAMP). We prove analytically in a fourth-order dynamics system that, once nominal wage stickiness is taken into account, LAMP does not invalidate the Taylor Principle: for any plausible degree of asset market participation an active interest rate rule ensures the uniqueness of the rational expectation equilibrium.

How does monetary policy affect financial markets? Coming out of the financial crisis much ink, both academic and non-academic, has been spilled trying to under- stand how policy makers should react to mitigate such a financial crisis. While there has been significant focus, justifiably, on crises, policy design and financial market transmission, there is very little theoretical work on how the effects of central bank policy transmits to asset prices. This thesis contends that the reasons for this dearth of theoretical research are two-fold - the dominance of log-linearisation in the New Keynesian tradition and a move to marginalise labour market channels in the asset pricing literature. The first means that these models fail to satisfactorily explain asset prices, while the second is a response to the perverse movements of employment in these models. Furthermore, attempts to fix the second problem make the first prob- lem even worse. I begin this thesis by addressing these two concerns. I show that by addressing them one can better explain reality both in terms of the business cycle and asset prices within this models. I proceed to develop a non-linear New Keynesian model and use it to construct a non-linear asset pricing relationship. Finally, I use this non-linear model, as a laboratory to analyse the transmission to financial markets of central banking policy following various simple Taylor rules. This work allows one to move from a situation where the impact of policy is well understood to one where the understanding is as yet incomplete. The insights gleaned from this research can be used to inform policy design with some understanding of the expected impact on asset markets.

A small amount of nominal wage stickiness makes limited asset market participation (LAMP) irrelevant for the design of monetary policy. Recent research argues that LAMP could invert the slope of the IS curve in otherwise standard New Keynesian models. This, in turn, implies that optimal monetary policy rules should be passive. We show that the so-called inverted aggregate demand logic (IADL) relies on nominal wage flexibility. Outside of extreme parameterizations, wage stickiness prevents the inversion of the slope of the IS curve. Hence, LAMP does not generally alter the trade-offs faced by a welfare maximizing Central Bank, and for this reason it does not fundamentally affect the design of optimal simple rules and optimal monetary policy. (JEL E21, E52).

We consider a simple, self-financing and informationally undemanding scheme to reduce the deadweight loss due to a monopolist's market power. Essentially, we propose taxing the monopolist and applying the tax revenue to generate a public demand for his output. It turns out that a favorable scenario for such a reform to generate an ‘efficiency increase’ (i.e. to increase total output) is an elasticity of market demand with an absolute value of less than 3 (a seemingly ‘realistic’ condition). We also consider the case for the implementation of the first best, and compare specific and ad-valorem taxes as a way to finance the public demand.