Essays on monetary-fiscal policy interactions and macroeconomic models of the term structure of interest rates

This dissertation investigates two topics: 1. The performance of a partial equilibrium macroeconomic model with recursive preferences to reproduce the term structure of interest rates, and 2. The performance of a general equilibrium macroeconomic model to explain inflation and output growth under interdependent monetary and fiscal policies. These two topics have in common the application of time series econometric techniques to estimate nonlinear state-space models. The first chapter of the dissertation formulates and estimates a consumption capital asset pricing model with recursive preferences and stochastic volatility to explain the term structure of interest rates. Stochastic volatility is modeled as a logistic function of a latent factor with a unit root. This introduces low and high uncertainty regimes with a transition stage between regimes, which is compatible with recursive preferences since agents may prefer an early resolution of uncertainty. Results show that the model can reproduce the average term structure of interest rates but not its volatility. The second and third chapters of the dissertation formulate, solve and estimate a new Keynesian model with monetary and fiscal policy rules whose coefficients are time-varying and contemporaneously interdependent. I implement time variation and interdependence in policy making by specifying policy rule coefficients as logistic functions of correlated stationary latent factors. The econometric estimation of policy rules shows that there is interaction between policies given a positive estimated correlation coefficient between latent factors. Policy experiments show that a tightening in monetary policy to reduce inflation leads to a "stepping on a rake" phenomenon where monetary policy can only control inflation in the short run; and that taxes have effects on output and inflation as the literature on the fiscal theory of the price level suggests, but the effects are attenuated with respect to a pure fiscal regime.