Date of Degree

6-2021

Document Type

Dissertation

Degree Name

Ph.D.

Program

Economics

Advisor

Merih Uctum

Committee Members

Sangeeta Pratap

Thom Thurston

Subject Categories

International Economics | Macroeconomics

Keywords

market structure, price-setting, spillovers

Abstract

Chapter 01: This paper explores the firm’s pricing-setting behavior through the lens of market structure and exchange rate pass-through. The basis for this chapter stems from a four-tiered nested constant elasticity of substitution demand function, where firms have non-negligible sector and subsector market shares. This model allows the firm to compete against firms within the same subsector, as well as against firms within other subsectors. From this model, I identify three propositions. First, a u-shaped price response in both sector and subsector market shares to an exchange rate movement. Second, a hump-shaped price response in subsector market share and a u-shaped price response in sector market share to a subsector price change. Third, an increasing price response in subsector market share and a hump-shaped price response in sector market share to a sector price change. The findings in the surrounding literature provide evidence in support of this model.

Chapter 02: The United States represents the largest single importer of goods and services in the world. Throughout the Post-World War II trade era, economists have observed a disconnect between U.S. exchange rates and import prices. This paper seeks to explain that puzzle using the market structure and spillover effects. This chapter presents a multi-country dynamic stochastic general equilibrium model, where firms have non-negligible market shares. From this model, I find two predictions. First, a U.S. trade partner will decrease its import price in response to a real exchange rate movement. Second, a U.S. trade partner will increase its import price in response to a competitor’s price increase. I provide evidence in support of these predictions using a Bayesian vector autoregression and impulse responses. From these empirical results, I then calibrate the theoretical model.

Chapter 03: This paper examines the impact of U.S. monetary policy on corporate revenues by sector. I use a structural vector autoregression model to estimate each sector’s sensitivity to monetary tightening. This model includes a dynamic factor to capture the spillover effects of growth in real output from other sectors. The dataset uses the Global Industry Classification Standard, which groups firms by principal business activity and revenue. The findings reveal a heterogeneous response across sectors to a one-unit innovation in interest rates.

Share

COinS