Three essays on macroeconomics

An equilibrium model of inventories with investment-specific technical change. The first aim of this paper is to undertake a quantitative examination of the secular decline in the inventory-sales ratio. The second aim is to understand how changes in inventory behavior have affected the cyclical volatility of the economy. We employ quality-adjusted price indices for capital goods to understand how this technical change alters the optimal mix of the three types of capital. The key finding is that the sustained decline in E&S prices has caused firms to substitute toward E&S and away from inventories. In particular, we find that employing the price index constructed by Cummins and Violante (2002) implies an inventory-sales ratio that mimics the historical data remarkably well. At a business cycle frequency, we find that the long-term decline in the significance of inventories does not lead to a substantial reduction in the volatility of output.; Capital flows among the G-7 nations: A demographic perspective . Theory predicts that a nation's current account balance could be a function of its demographic-age profile. To test this theory's plausibility, I simulate a multi-region overlapping generations model that is calibrated to match the demographic differences among the major industrialized countries over the past 50 years. In the model, it is found that these differences can explain some of the observed long-term capital movements in the G-7. In particular, the model does a good job of predicting the timing of the American current account deficits and the Japanese current account surpluses.; Monetary policy and the information content of the yield spread . This paper demonstrates that the ability of the yield spread to predict output fluctuations is contingent on the monetary authority's reaction function. In particular, the yield spread will only predict output when the central bank seeks to smooth both output fluctuations and variability in the short-term interest rate. Furthermore, numerical experiments suggest that the recent decrease in the yield spread's predictive power is due to a shift in monetary policy during the Volcker and Greenspan years.