Essays in Macroeconomics

This thesis is composed of three chapters: in the first chapter, “Inequality and the Medium-Term Business Cycle”, I show that heterogeneous agents endogenous growth (HAEG) model economies display less deep recessions and more contained booms than their representative agent counterparts over the medium term business cycle. The smoothing in GDP standard deviation (over the medium term business cycle) ranges around estimates of 14% and 28%. This difference increases with (i) the presence of illiquid assets and (ii) the elasticity of R&D to the total stock of varieties. Nonetheless, at the business cycle frequency, HAEG economies behave as in Krusell and Smith (1998): output time series are as if generated by a representative household.The second chapter,“RulingOutStagnationTraps”, joint with S.Nisitcò, presents empirical evidence in support of a non-monotonic relationship between employment and productivity growth. It studies the implications of such non-monotonicity in a model where growth occurs endogenously through both vertical innovation and reallocation into entrepreneurship, with nominal rigidities and monetary policy. It characterises the conditions for the existence of multiple steady-state equilibria featuring low growth and unemployment, and the role of economic policy to bring the economy towards the full-employment steady state. It shows that economic policies targeted at easing business creation activities can both prevent the occurrence of unemployment steady states and help the economy to get out of them.Finally, the third chapter, “World Trade Stagnation”, presents recent empirical evidence showing that emerging economies (EMEs) currently account for most of the world GDP and global growth, their trade flows with advanced economies (AEs) doubled during the mid-80s till the 2012 and their investment in R&D increased by 26.4% per year between 1997-2008, almost catching-up with AEs productivity around the 2009 and displaying the same AEs TFP growth rate thereafter. These developments were accompanied by trade balance reversals and by a rapid increase in world trade (the so called “hyper-globalization”) which culminated in the Great Trade Collapse of the 2009 and a subsequent stagnation up to nowadays. I present a two-country model with firms heterogeneous in productivities à la Melitz (2003), endogenous growth and international R&D spillovers that accounts for these facts. It is found that innovation and trade dynamics are closely tied and trade balance reversals are consequences of asymmetric needs of funding stemming from innovation efforts. Trade stagnates after the 2008 because of stagnant proximity to the technological frontier of EMEs (with respect to AEs).