Economic Crises and Production Factors Flows
Abstract
This dissertation is a collection of essays that relate, in different forms, economic crises to production factors flows. Production factors include capital and labor.
Essay 1 proposes a novel explanation for the origin of the housing boom in the early 2000s: the household asset allocation channel. It argues that following the dot-com bubble crash in 2000, households shifted their investments away from stocks and toward houses, leading to an increase in housing prices from 2000 to 2006. Through a theoretical model, it is demonstrated that the households’ portfolio share in stocks influences housing prices through two mechanisms: the wealth effect and the flow-of-funds effect. Furthermore, the model quantitatively shows that approximately 18 percent of the U.S. real housing price growth during 2000-2006 can be attributed to the households’ portfolio shifts.
Essay 2 provides empirical evidence of a causal relationship between households’ stock market participation and housing prices in the early 2000s. It observes that the decline in stock market participation during 2001-2003, as a result of the dot-com bubble crash, led to an immediate and medium-term (2001-2006) increase in housing prices. Additionally, this essay investigates the micro-foundations of this phenomenon, revealing that the residence purchases by young individuals and investors play an important role.
Essay 3 refers the reader to survey articles on the effects of the Global Financial Crisis on international capital flows. International capital flows have challenged economists’ models for decades. Over time, global capital flows go through boom and bust cycles, sudden stops, and unprecedented bonanzas. Determinants of capital flows include “pull factors,” recipient countries’ economic and structural characteristics, and “push factors” or “global factors”.
Essay 4 proposes a model-based method to estimate industrial unemployment during recessions. Unlike most surveys that evaluate industrial unemployment based on respondents’ last job held, which may not reflect their current job searches, this novel approach provides a more accurate estimation. Using this method, the number of industrial unemployment cases after the Great Recession (2008-2015) was estimated.