Essays in Macroeconomics and International Trade

Abstract

The choice of regulatory instrument is key to the implementation of policy. In practice, regulatory instruments are classified into two categories: quantity regulations, which limit the menu of permissible actions, and price regulations, which act like a tax to alter incentives. Both kinds of instruments, price and quantity regulations, are used extensively. For instance, financial regulators use both caps on loan-to-value ratio as well as taxes on borrowing. Likewise, trade policy features both non-tariff measures and tariffs. Recent developments in modelling economies with privately informed heterogenous agents have changed our understanding of optimal policy. The implementation of such policy recommendations, however, often requires much more complex tools than the ones used by regulators. This thesis contributes to filling this gap between theory and practice by providing an analytical framework to study the design of optimal simple price and quantity regulation in economies with privately informed heterogenous agents. The framework is applied to the design of macro-prudential regulation in chapter 2 and to the regulation of a monopoly in chapter 3. Chapter 4 studies the effect of price regulations, such as tariffs, on international trade flows.