Macroeconomic Fluctuations and Stabilization Policies

• Applicant: Professor Dr. Matthias Meier
• Subject Area: Economic Theory
• Term: since 2025
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 550470072

The single, overarching theme of my proposal is macroeconomic fluctuations and stabilization policies. My aim is to spell out implications of firm heterogeneity for business cycles and to analyze macroeconomic stabilization policies. I plan to make significant contributions to the literature on three specific sub-topics: corporate debt, manufacturing order books, and systematic monetary policy. In the following, I will provide a brief summary of the objectives associated with the three topics. My research plans on corporate leverage have three objectives. The first objective is to study the effects of a monetary tightening following a long period of low interest rates and an associated rise in corporate leverage. The second objective is to analyze the effects of unconventional monetary policy, in contrast to conventional monetary policy, in an environment with short-term and long-term corporate debt. The third objective is to study macroeconomic stabilization policy in an environment in which firms choose debt maturity and the composition of investment across short-lived and long-lived projects. My research plans on manufacturing order books have six objectives. The first objective is to document the distribution of order backlog across establishments in the manufacturing sector in Germany. Most theories of the firm cannot speak to the evidence as they assume all orders are filled immediately or with a constant, one-period delay. The second objective is to develop a tractable model of an establishment with an order backlog that allows characterizing the effects of supply and demand shocks and to study the cushioning effect of order backlog. The third objective is to empirically estimate the causal effects of supply and demand shocks at the establishment level with a particular focus on the order backlog. The fourth objective is to study the role of order backlog as a source of nominal price rigidity. The fifth objective is to develop a quantitative dynamic stochastic general equilibrium model to study the implications of order backlogs for business cycles and macroeconomic stabilization policies. The sixth objective is to revise and extend the official statistical series of order book dynamics. My research plans on systematic monetary policy have three objectives. The first objective is to study the effects of systematic monetary policy in propagating energy supply shocks with a focus on the recent inflation surge. The second objective is to theoretically study conventional empirical strategies to construct monetary policy shocks in a model environment with time-varying systematic monetary policy. The third objective is to propose new empirical monetary policy shocks that are robust to time-varying systematic monetary policy and study their empirical effects on macroeconomic aggregates in comparison to conventional empirical monetary policy shocks.

• DFG Programme: Research Grants