Three Essays on Time Series Econometrics with Applications to Banking, Fiscal Policy, and Housing Price Dynamics

Abstract

This dissertation investigates three dimensions of price dynamics in banking, fiscal pol icy, and housing markets using time series econometric approaches. Chapter One examines whether charge-off rates (CORs) from the largest U.S. bank holding companies can serve as early warning indicators of systemic risk. Using consolidated financial statements from the top ten largest U.S. bank holding companies, we construct loan-level CORs for business, real estate, and consumer loans. Factor-augmented forecasting models incorporating latent macroeconomic factors outperform benchmark models, particu larly for business and real estate loan CORs, while consumer loan CORs remain difficult to predict, especially at short horizons. Real activity factors substantially enhance predictive performance in the absence of financial factors. Chapter Two analyzes the effects of U.S. fiscal policy shocks on labor market outcomes using structural vector autoregressive (SVAR) models for postwar data (1960:I–2017:II). Fiscal spending shocks raise government sector employment but crowd out private sector jobs, leading to net losses in total employment. While government wages rise significantly and persistently, private wages respond only marginally, widening the wage gap across sectors. Wage shocks, however, yield long-run gains in corporate profits by enhancing productivity, consistent with wage-led growth. By contrast, corporate profits show negligible predictive power for private jobs and wages, providing little support for profit-led growth models or trickle-down effects. Chapter Three investigates the long-run drivers of housing price dynamics across 29 Chinese regional markets. Conventional cointegration frameworks generate estimates that are consistent with supply-and-demand shifters, but DOLS contradicts this, showing heterogeneity across 29 cities. Among conventional predictors, only real income consistently explains regional housing prices. Interest rates and building costs fail to exhibit stable ef fects across regions. This chapter underscores the heterogeneity across regions in China’s housing markets and highlights the need for tailored, region-specific housing policies rather than uniform national strategies. Together, these three essays advance our understanding of price dynamics in banking, fiscal policy, and housing markets, while also illustrating the importance of appropriate econometric design in uncovering underlying economic mechanisms.