Essays on monetary economics and macroeconomics

My dissertation consists of three essays. Each of them is self-contained and independent of the others. The first essay examines the importance of macroeconomic factors coming through fiscal and monetary policies and monetary transmission mechanism that could influence the economic crisis in the 1990s in the case of Japan. The empirical results show the important role played by financial intermediation. The second essay attempts to investigate two questions. Do financial asset prices play an important role in the U.S. monetary economy? Should U.S. monetary policy respond to financial asset prices in order to improve its performance? To address these questions, first, I develop a model and use maximum likelihood method to estimate that model with quarterly data on output, inflation, financial asset prices, and the short-term interest rate. The estimates reveal that financial asset prices play a minimal role in the transmission mechanism of monetary policy. Next, I turn to welfare analyses. I compare two opposite cases under which monetary policy should or should not respond to financial asset prices. When output and inflation stabilizations are fundamental goals of monetary policy, it becomes clear that U.S. monetary policy would not be significantly improved if it responded to changes in financial asset prices. The third essay develops a small structural model of the United States economy with microfoundations and estimates the model with quarterly data on output, inflation, housing prices and the short-term interest rate from 1980 to 2003. The estimated model assigns housing prices a minimal role in the U.S. monetary business cycle.