Essays on macroeconomics and applied economics



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This dissertation analyzes three chapters about the (1) effects of shocks to financial intermediaries on inflation, (2) the sectoral renewables consumption, economic Growth and CO2 emissions, and (3) consumers' willingness to pay for fuel efficiency of vehicles using the hedonic pricing model (HPM). The body of the dissertation research papers is divided into three different chapters to provide concise and in-depth discussions of each chapter individually.

The first chapter focuses on effects of shocks to financial intermediaries on inflation in terms of banks' loan, based on a monthly data set for the U.S. extending from 1990 (M1) to 2019 (M12), through the construction of a vector auto-regression (VAR), and vector error correction (VECM) models, including an impulse response function analysis. Moreover, findings show a strong association between bank loans via financial intermediaries and inflation, economic growth, and the tools of the monetary policy. This includes, for example, bank credits have mixed effect (positive, negative and no effect) on inflation, economic growth, federal fund rate, interest rate spreads and 10-year treasury yield; there is a short-run and long-run relationship from bank loan to inflation, taking inflation as the target variable under the VECM; importantly, the relationship between consumer and business loans through banks and macroeconomic variables like inflation, economic growth, short-run and long-run tools of the monetary policy are of different nature before and after the recession. Precisely, different methods used in the investigation reproduce similar results based on the documented methods, ensuring the accuracy and efficiency of the methods opted by the researchers in this study.

The second chapter examines the effect of sectoral renewables in the transportation , industrial and the electric power sectors upon economic growth, and detects the validity of the Environmental Kuznets curve (EKC) during the period 1990–2019 based on the U.S. monthly data by using the ARDL bounds testing approach to cointegration. Moreover, findings of this study show (i) no statistically significant causality from renewable energy consumption in all 3 sectors (IS, TS and EPS) to real output (as a measure of economic growth) both in the short-run and long-run --indicating the presence of the neutrality hypothesis. (ii) The invalidation of the EKC-- an inverted U-shaped relationship between economic growth and share of CO2 emissions via renewables--for the U.S.; (iii) negative, positive and no significant effects on CO2 emissions via renewables in the TS, IS and EPS, respectively, in the short-run; and (v) positive and significant effects on CO2 emissions via renewables in the TS, the IS and the EPS in the long-run. Importantly, the robustness test again invalidates the EKC and satisfies the neutrality hypothesis.

The third chapter investigates the consumers’ willingness-to-pay for fuel efficient vehicles based on car type, fuel type, gas mileage, price of oil and tax-credit for electric vehicles in the US, applying the semilogarithmic form of the hedonic pricing regression model (multiple linear regression analysis based on the hedonic pricing model) with the cross-sectional data for the year 2019. Moving forward, the findings of this study provides a strong evidence in favor of the CAFE standard policy for the fuel-efficient vehicles in the U.S. during the study period as follows: First, consumers are willing to pay higher prices for electric cars than the traditional gasoline vehicles. Second, consumers are willing to pay less price for the fuel efficient cars because of the existence of the used car market--suggesting the adoption of the tax credit for electric vehicles. Third, consumers are willing to pay less prices for car when the price of oil increases. Fourth, consumers are likely to pay higher prices for the fuel-efficient vehicles in the presence of the tax-credit for electric cars.

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CAFE: Corporate Average Fuel Economy, EKC: Environmental Kuznets Curve, IS: Industrial Sector, EPS: Electric Power Sector, VAR: vector autoregressive model, VECM: Vector Error Correction Model, M1: January, M12: December, CO2: Carbon dioxide, TS: Transportation Sector