STUDIES ON MACROECONOMICS AND UNCERTAINTY, ACTA UNIVERSITATIS OULUENSIS G Oeconomica 90
|Kustantaja:||Oulun yliopisto|| |
|Sijainti:||Print Tietotalo|| |
|Tekijät:||KOIVURANTA MATTI|| |
This dissertation is comprised of three independent essays with the unifying theme of how
uncertainty affects the macroeconomy. The first essay studies an incomplete market economy
where the firm faces a non-trivial investment decision due to capital adjustment costs. The
adjustment costs make the price of capital endogenous and help to explain the observed volatility
of the returns to physical capital. The particular form of market incompleteness that is assumed in
the essay is however not enough to match the observed price of risk. The essay contains also a
technical contribution in showing how Arrow prices of contingent commodities can be used in
computing the equilibrium in this class of models.
The second essay studies the effect of population aging on asset prices. The modeling
framework features deterministic transition paths for demographic structure and level of
government expenditures along with aggregate uncertainty at business cycle frequency. The
demographic transition leads to a projected increase of in tax rates that are needed to finance the
government expenditures. This requires higher savings rates from households which reduces
volatility of consumption growth and reduces the price of aggregate risk.
The third essay is an empirical study which uses betting market data from the Swedish harness
horse racing in conjunction with economic confidence indices. The main finding is that the risk
attitudes of bettors that are reflected by the betting market data covary with the more traditional
confidence measures in a reasonable way. The essay also contains a simple forecasting exercise
which shows that the novel risk measure may also be useful in forecasting the industrial
production. The results of the study are interpreted in terms of behavioral macroeconomics.