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UBC Theses and Dissertations

Essays on macroeconomics and corporate behavior Wang, Mingzhi


This dissertation focuses on the link between corporate behavior and macroeconomic phenomena. It is comprised of three separate but related chapters: The first chapter asks whether increases in firms' outsourcing can explain the downward trend of the investment to GDP ratio of the US. I develop a model with heterogeneous firms and a fixed cost to enter outsourcing. I test the model's implications using a novel dataset collected from US computer manufacturing firms' annual reports and find that empirical facts are consistent with the model. I find outsourcing firms invest less while produce more. Also, the lessening effect of outsourcing on investment is increasing over time. In the second paper I first show that the divergent trends in the macro and micro volatility of output is nonexistent after the year 2000. Then I argue that rapid technological innovation in the 80s and 90s contributes to these divergent trends. I explain the driving force of the different patterns of volatility using a model in which firms' investment has both long term and short term gains. Higher long term gain leads more firms to invest in risky projects resulting in higher micro volatility. At the same time, more participation contributes to better diversification at the aggregate level, hence lower macro volatility. The third chapter investigates the stock market's reaction to monetary policy shocks. I use the Romer and Romer(2005) measure of policy shocks and event study approach to perform this task. I find that stock market returns respond to monetary policy shocks. There is an asymmetry in the reaction in terms of boom and recession periods, small firms are more sensitive to shocks than large firms, highly leveraged firms are more sensitive to shocks than those with less leverage. These findings shed new lights on whether monetary authority should take into account the effects on financial market when making monetary policy changes.

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