Institutional Frictions & Policy Constraints in Macroeconomic Transmission: Essays in Macroeconomics, Monetary & Fiscal Policy, and DSGE Business Cycle Modelling

This thesis consists of five self-contained essays in macroeconomics, DSGE modelling, and applications to the analysis of macroeconomic stabilisation, particularly through monetary and fiscal policy. Beyond the methodological framework, the unifying thread is modelling and assessing the role in the macroeconomic transmission and stabilisation of an array of institutional frictions and policy constraints -- on the back of the organising sub-literatures surveyed in the introduction -- critically moot in the New Keynesian (NK) architecture traditionally underpinning macro-forecasting and policy analysis. Taking stock, the chapters individually explore following institutional frictions and policy constraints. Chapter 1 looks at the impact on dynamics and desirable stabilisation policy of the joint rise of fiscal dominance and institutionalised occasionally binding limits to (inflationary) debt issuance and accumulation. Chapter 2 examines the integration occasionally binding policy constraints in heterogeneous agents DSGE, such as ZLBs/ELBs, with financial frictions at the household level, and applications to the question of redistributive policy in stabilisation in ZLB and recessionary phases in incomplete markets unequal economies. Chapter 3 looks at the role of financial-market incompleteness and portfolio optimisation -- as alternative asset-pricing based mechanisms of interest to policy transmission in incomplete markets environments -- in shaping nonlinearities in the pass-through from inflation stabilisation to asset prices. Chapter 4 studies the role of financial-institutional structure and its variation, and agents’ expectations thereon, in shaping business cycle dynamics in financially-led economies through financial-real cycles. Finally, Chapter 5 draws on my recent research work at Bank of England and examines in structural Bayesian business cycle estimations -- using and innovating frontier solvents in non-FIRE sequence-space DSGE -- the role of deviations from FIRE consistent with micro-evidence, both as a source of soft constraints on monetary policy and shock transmission, as a discriminating and disciplining factor for sharper identification and estimation of structural monetary policy parameters.

Name dc:type.qualificationname

Doctor of Philosophy (PhD)

Level dc:type.qualificationlevel

Doctoral

Grantor dc:publisher.institution

University of Cambridge

Year dc:date.issued

2026

Author dc:creator

• Rosso, Biagio

Advisor dc:contributor.advisor

• Fennell, Shailaja

• Macroeconomics
• Monetary Economics
• DSGE
• Monetary Policy
• Fiscal Policy
• RANK
• HANK
• Sequence-Space DSGE
• DSGE Bayesian Estimation
• Optimal Policy Rules
• Business Cycle Modelling
• Macroeconomic Transmission
• Nonlinear DSGE and Dynamics

Licence

• https://www.repository.cam.ac.uk/bitstreams/7d5b537d-2839-4dba-b8f9-2ea29039423c/download
• http://purl.org/NET/rdflicense/allrightsreserved

Language dc:language

eng

DOI dc:identifier.doi

https://doi.org/10.17863/CAM.131078

OAI identifier oai:identifier

oai:www.repository.cam.ac.uk:1810/404514