Essays on Macroeconomics and Financial Economics

Abstract

This dissertation comprises of three Essays. The first essay classifies households as savers and borrowers based on their wealth during the credit cycle. It examines the wealth effects of the saving and housing decisions of heterogeneous households over a credit cycle. To do so, we employ the Difference-in-Difference estimator and find evidence of a significant difference between the wealth effect for savers and borrowers. In the second essay, we examine the extent to which credit-constrained households are able to accumulate wealth when the macro environment is characterized by the presence of a liquidity trap and borrowing constraints. Our evidence highlights the importance of credit constraints in modeling household saving behavior. In the third essay, we evaluate the role of education, household composition, health expenditures, and bequest motives in determining retiree wealth. We find that the bequest motive positively affects the wealth of retirees as they save more and accumulate assets to ensure that their offspring inherit part of their wealth.