Essays in applied macroeconomics

This dissertation explores three topics in applied macroeconomics. Chapter two proposes a new methodology to reexamine the effects of financing constraints on fixed investment of firms. The third chapter analyzes changes in the price of risk to explain recent stock market trends in the U.S. In the fourth chapter, a new methodology of the estimation of the natural rate of unemployment, the NAIRU, is proposed and applied to the U.S. data.; It is widely documented that firms' cash flows and investments in physical capital are strongly correlated. Previous empirical research supports the view that the observed correlation of investment and cash flows is due to the financing constraints. In chapter two, a modified test of financing constraints, which allows for cross-sectional differences in the adjustment costs of investment, is proposed and applied to a panel of U.S. manufacturing firms to analyze the impact of financing constraints on fixed investment. It is found, contrary to prevailing wisdom, that there is little evidence supporting the financing constraints hypothesis.; Chapter three focuses on the relation between the market value of a firm and a fundamental measure of risk, which reflects the volatility of future earnings. Analysts' forecasts are used to estimate the expected future earnings and the amount of risk associated with them. The price of risk is then estimated from cross-sectional regressions. It is found that the price of risk did not follow an apparent downward trend during the last two decades, thus, rejecting the hypothesis of the declining price of risk as an explanation for the recent stock market growth.; Recent studies have found that the estimates of the NAIRU are quite imprecise. However, primary attention in these studies has been devoted to the estimation of the price equation of inflation alone. The precision of the estimates of the NAIRU can be improved if the price and wage equations are estimated together. Chapter four develops the asymptotics of the multi-equation estimator of the NAIRU and applies it to the postwar US data. It is found that the multi-equation estimator has tighter confidence intervals than the single-equation estimator.