CEU Electronic Theses and Dissertations, 2020
| Author | Gábor-Tóth, Enikő |
|---|---|
| Title | Household Heterogeneity, Trade and Macroeconomics |
| Summary | Chapter 1: Economic Policy Uncertainty and Stock Market Participation Do economic policy uncertainty news affect household stockholding? To answer this question we create a novel measure of household exposure to economic policy uncertainty news by combining survey information on the hours a household spends in reading newspapers and the frequency of such news in the popular press during a household’s pre-interview period. After controlling for household fixed effects, month-year fixed effects and time-varying cognitive skills, we find that households with more exposure to economic policy uncertainty news are less likely to invest in stocks directly or through mutual funds. This effect is independent from the VIX and household stock-price expectations. Chapter 2: The Relative Importance of Taste Shocks and Price Movements in the Variation of Cost of Living: Evidence from Barcode Data Intertemporal consumer preference shifts, although common in modern macroeconomic models as drivers of demand shocks, have important but largely unexplored implications for price index theory and thus, for empirically measured price changes. The current practice of inflation measurement basically ignores taste changes and this study aims to fill in this gap. We derive a cost-of-living index in the presence of intertemporal preference shifts and show that such taste changes tend to lower the cost of living. Using a large barcode level dataset that covers 331 product groups and ten countries, we then uncover the importance of taste changes in explaining consumer demand shifts across close substitutes. We also analyze how measured consumer price inflation alters after allowing for taste adjustment over time and under CES preferences. To do so, we estimate the elasticity of substitution between varieties of the same good and use those to calculate goods price indexes. Our results show that the median elasticity of substitution is around 4 and we find that the average annual goods price inflation is on average about 1.1 percentage points lower when taking into account consumer taste shifts compared to standard goods price indexes. Our results indicate that taste changes are an important hitherto ignored factor in the measurement of cost of living changes. Chapter 3: A Model of Trade in Used Durable Goods This chapter examines the role of secondary markets in durable goods in cross-country trade dynamics, with a special focus on the car industry. It contributes to the literature by providing a better understanding of the drivers of high trade volatility in durable goods. Empirically, it documents patterns in new and used car trade flows for a sample of European Union countries. Further, it develops a two-country general equilibrium model of trade in which countries can trade on the various vintages of a durable good. Countries can differ in their initial endowment, growth rate in the car sector and the representative household's preference for new versus older vintages. Adjustment in the level and age composition of the car stock can occur by new car production or international trade. This relationship is responsible for the dynamics of the model. Trade patterns are determined by comparative advantages. The model predicts that the country that experiences a high growth rate in new car production has comparative advantage in new cars and becomes a new car exporter. Further, the country that dislikes old cars relatively less will consume used cars and export new cars. Cross-country differences in tastes and growth rate in new car production influence cross-country trade dynamics. A sudden negative supply shock triggers stock adjustment in the country hit by the shock which generates large initial trade flows and muted but persistent trade flows thereafter. The chapter presents a numerical example and simulation results for the model that uses parameters calibrated to the primary and secondary car market in Germany and Hungary. |
| Supervisor | Koren, Miklós |
| Department | Economics PhD |
| Full text | https://www.etd.ceu.edu/2020/gabor_eniko.pdf |
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