Essays in Macroeconomics

Summary This thesis presents work on low economic growth, low inflation and low interest rates in advanced economies. Chapter 1 presents the pro-competitive effects of trade on prices, productivity and firm margins. Openness to global trade implies a larger market and greater competition among firms, which in turn leads to lower inflation and higher average productivity. Chapter 2 examines the role of market power in the transmission channels of monetary policy. A high level of market power would mitigate the effects of monetary policy and relax financial constraints. In chapter 3, positive supply shocks under zero policy rates generate divergent results between theory and empirical analysis. Specifically, in contrast to the recessionary effects of supply shocks at zero policy interest rates (ZLB) predicted by the theoretical model, the empirical analysis does not produce these expected results. The fourth chapter constructs different indicators of uncertainty at the macroeconomic level and studies how uncertainty affects economic activity. Uncertainty negatively affects economic activity. However, the scope of macroeconomic analysis is limited by a potential endogeneity problem. Chapter 5 addresses this problem through the analysis of firm-level uncertainty using business survey data. The measure of uncertainty calculated with the firms' forecast errors significantly affects activity. However, their effect varies with the sign of the error. An underperformance of the forecast significantly reduces activity, while the opposite situation has a small effect. To summarize, the first two chapters deal with inflation and market power as explanations for the low inflation and low policy impact. Chapter 3 assesses the consequences of the zero policy rate environment. The last two chapters assess the role of uncertainty at the macro and micro levels in explaining low growth.