Ecole des HEC-DEEP
Thèse de doctorat en Sciences Economiques mention "économie politique"

Elmar MERTENS

Three Essays on the Determinants of Output, Inflation and Interest Rates

Directeur : Jean-Pierre Danthine
Imprimatur : septembre 2007

Abstract
Output, inflation and interest rates are key macroeconomic variables, in particular for monetary policy. In modern macroeconomic models they are driven by random shocks which feed through the economy in various ways. Models differ in the nature of shocks and their transmission mechanisms. This is the common theme underlying the three essays of this thesis. Each essay takes a different perspective on the subject: First, the thesis shows empirically how different shocks lead to different behavior of interest rates over the business cycle. For commonly analyzed shocks (technology and monetary policy errors), the patterns square with standard models. The big unknown are sources of inflation persistence. Then the thesis presents a theory of monetary policy, when the central bank can better observe structural shocks than the public. The public will then seek to infer the bank's extra knowledge from its policy actions and expectation management becomes a key factor of optimal policy. In a simple New Keynesian model, monetary policy becomes more concerned with inflation persistence than otherwise. Finally, the thesis points to the huge uncertainties involved in estimating the responses to structural shocks with permanent effects.