Tannous HANNA-KASS-HANNA will defend his thesis in Economics on « Essays in Fiscal and International Economics », next March 11th at 3pm, Auditorium 4.
Supervisor: Patrick FEVE
- Axelle FERRIERE, Ecole d’Economie de Paris
- Edouard CHALLE, Ecole Polytechnique de Paris
- Christian HELLWIG, UT1 Capitole, Toulouse School of Economics
- Patrick FEVE, UT1 Capitole,Toulouse School of Economics
This thesis tackles the transmission of fiscal policy, with a focus on noisy news and its cross-border spillovers. It is composed of four chapters:
In the first chapter, I provide an analytical characterization of the effects of noisy news shocks on the transmission of fiscal policy. Using a small-scale Dynamic Stochastic General Equilibrium (DSGE) model with capital accumulation and endogenous labor supply, this chapter shows how aggregate noise dampens the propagation of anticipated fiscal policy over the business cycle, thus reducing the fiscal multiplier.
In the second chapter, I investigate the cross-border spillovers of fiscal stimuli policies – as conducted in the aftermath of the Great Recession – using a two-country New Keynesian DSGE model. Fiscal policy is assumed to be noisy: private agents receive an idiosyncratic noisy signal about future government spending shocks. This characterization of the model allows for the dispersion of individuals’ expectations and captures one of the components of fiscal policy uncertainty. This chapter also shows a method for identifying the relevance of noise within fiscal policy news, and computes the average level of noise using the Survey of Professional Forecasters (SPF) dataset. By comparing the model simulations under the case of full information with that under noisy fiscal policy, this chapter illustrates how noise considerably weakens the international spillovers of fiscal policy.
The third chapter tackles the domestic and cross-border quantitative effects of fiscal policy within a monetary union by building a two-country Heterogeneous Agents New-Keynesian (HANK) model in order to quantify the internal and external spillovers of fiscal policy on growth and inequality. Using the Household Finance and Consumption Survey (HFCS) data for Germany and the rest of Euro area, the model is calibrated to match wealth and income distributions. As a policy experiment, I take the case of the fiscal devaluation, that attempts to mimic competitive exchange rate devaluation. The results suggest that specific country policy has non-negligible impact on other country wealth distribution. Inequality transmits through two channels: (i) prices, which affect the household consumption level and split between foreign and home goods and, (ii) the interest rate on bonds, whose any change affects all the members in the monetary union. Finally, this chapter sheds the light on the importance of introducing heterogeneity at the international level in understanding the complex transmission of fiscal policy.
In the final chapter, I augment a dynamic labor market general equilibrium model with search and matching frictions in the public and private sectors to include components of government spending: public wage bills, public investment, and transfers. The model elucidates the interactions between public and private sectors, and have numerous policy implications. I also conduct model simulations that show how a policy mix decreasing public employment and increasing public investment can boost the private sector and increase fiscal space in the long run.