Essays on macroeconometrics

Abstract

This dissertation contains three chapters in theoretical Macroeconometrics and applied Macroeconometrics. This first chapter addresses the issues related to the estimation, testing and computation of ordered structural breaks in multivariate linear regressions. Unlike common breaks, ordered structural breaks are those breaks that are related across equations but not necessarily occurring at the same dates. A likelihood ratio test assuming normal errors is proposed in this chapter in order to detect the ordered structural breaks in multivariate linear regressions. The estimation of ordered structural breaks uses quasi-maximum likelihood and adopts the efficient algorithm of Bai and Perron (2003). I also provide results about the consistency and rate of convergence when searching for ordered structural breaks. Finally, these methods are applied to one empirical example: the mean growth rate of output in three European countries and United States. This second chapter focuses on the parameter stability of dynamic stochastic general equilibrium (DSGE) models. To this end, I solve and estimate a representative New Keynesian model using both linear and nonlinear methods. I first examine how nonlinearities affect the parameter stability of the New Keynesian model. The results show that parameter instabilities still exist even using nonlinear solutions, and also highlight differences between two nonlinear solution methods: perturbation method and projection method. In addition, I propose a sequential procedure for searching for multiple structural breaks in nonlinear models, and apply it to the New Keynesian model. Two common structural breaks among these estimated parameters are identified for all the five solutions considered in this chapter. One structural break is in the early 1970s, while another one locates around the middle 1990s. In the third chapter, we investigate changes in long run productivity growth in the United States. In particular, we approach productivity growth from a sectoral perspective, and decompose the whole economy into two broad sectors: investment goods-producing sector and consumption goods-producing sector. Although the evidence of changes in the aggregate productivity growth is far from obvious at conventional test size, we find evidence of structural breaks in the sectoral productivity growth using both growth accounting and DSGE model based measures. There are two structural breaks in investment goods-producing sector using growth accounting measures, which indicates that the era of investment and productivity boom in the middle 1990s may have ended before the Great Recession. In addition, our results show there is one structural break in consumption goods-producing sector around the 1970s and attribute the aggregate productivity slowdown at that time to consumption goods-producing sector. These results are broadly consistent with Ireland and Schuh (2008). Our results offer up with a modestly pessimistic outlook on future productivity growth and, therefore, potential output.