## The Implications of Population Aging for Economic Growth a Regional Comparative Study

**By Paige Muggeridge**

I use a reduced form regression model to determine the extent to which population aging accounts for economic growth in each of the nine regions of the world. Predominantly, I build upon the research of Bloom et al. (2010), which is central to formulating my regression equation. I separate the difference between each region’s average growth rate from the world average growth rate into demographic and non-demographic effects using the estimated coefficients. The results suggest that more economically developed regions have potentially benefited from population aging, while less economically developed regions have not.

**Advisor:** Craig Burnside |** Tagged: ** Economic Growth, Economic Policy, Labor-force Participation, Life Expectancy, Population Aging, Retirement Age

## Understanding the Argentine Peso’s Devaluation in 2014 —Analysis on Argentina’s Fiscal Sustainability from 1993 to 2013

**By Feng Pan**

This research analyzes the fiscal sustainability of Argentina from 1993 to 2013. Specifically, it explains the peso devaluation in early 2014 and suggests that it is primarily due to the fundamental problems in Argentina’s economy. This paper highlights Argentina’s inability to enhance its fiscal conditions and suggests possible future economic developments in Argentina. This paper concludes that there is high

chance of hyperinflation, debt default, and the eventual dissolution of the managed exchange rate regime in Argentina in the future.

**Advisor:** Alison Hagy, Craig Burnside |** JEL Codes:** E43, E44, E52, E58, E62, F31 |** Tagged: **Argentine Peso, Exchange Rate, Fiscal Sustainability

## Market Dynamics and the Forward Premium Anomoly: A Model of Interacting Agents

**By Phillip Hogan**

This paper presents a stochastic model of exchange rates, which is used to explain the forward premium anomaly. In the model, agents switch between four trading strategies, and these changes drive the evolution of the exchange rate. This framework is meant to more realistically represent the important market dynamics of exchange rates, as we suspect these to be the cause of the forward premium anomaly. Our simulations of the model indicate two conclusions: (i) many of the statistical regularities observed in currency markets, including the forward premium anomaly, can be thought of as macro-level scaling laws emerging from micro-level interactions of heterogeneous agents, and (ii) the dynamics of estimates of the beta coefficient in tests of UIP are driven by perceived relationships between changes in interest rates and agents’ aggregate views on the value of the exchange rate, which we call the fundamental value. Section I presents an introduction to the topic and section II reviews the relevant literature. Section III provides the theoretical basis of the forward premium anomaly and our model, then the mathematical definition of the model. Section IV presents the results of a typical simulation which section V compares to relevant stylized facts of the currency markets. Sections VI and VII present our results and a conclusion of what we have drawn from the model.

**Advisor:** Craig Burnside, Michelle Connolly |** JEL Codes:** G1, G13, G15 |** Tagged:** Exchange Rates, Forward Premium Anomaly

## The Economic Effects of Military and Non-Military Government Spending

**By Patrick Royal**

There has been substantial investigation into the influence of government spending in general on economic growth, unemployment, and inequality, but relatively little investigation into the relative effects of different types of spending. This thesis attempts to separate the influence of military and non-military government spending on the economy. As with many such investigations, it focuses on a single economy – that of the United States. The results indicate that, dollar for dollar, military spending is just as effective as non-military spending at affecting unemployment, but much more effective at promoting short-term growth. Neither type of spending has a strong impact on income inequality, suggesting that the primary determinants of that are not related to government spending.

**Advisor:** Craig Burnside |** JEL Codes:** E1, E12, E62 |** Tagged: ** Government Spending, Growth, Military

## Market Dynamics and the Forward Premium Anomoly: A Model of Interacting Agents

**By Evan Myer**

This paper presents a stochastic model of exchange rates, which is used to explain the forward premium anomaly. In the model, agents switch between four trading strategies, and these changes drive the evolution of the exchange rate. This framework is meant to more realistically represent the important market dynamics of exchange rates, as we suspect these to be the cause of the forward premium anomaly. Our simulations of the model indicate two conclusions: (i) many of the statistical regularities observed in currency markets, including the forward premium anomaly, can be thought of as macro-level scaling laws emerging from micro-level interactions of heterogeneous agents, and (ii) the dynamics of estimates of the beta coefficient in tests of UIP are driven by perceived relationships between changes in interest rates and agents’ aggregate views on the value of the exchange rate, which we call the fundamental value. Section I presents an introduction to the topic and section II reviews the relevant literature. Section III provides the theoretical basis of the forward premium anomaly and our model, then the mathematical definition of the model. Section IV presents the results of a typical simulation which section V compares to relevant stylized facts of the currency markets. Sections VI and VII present our results and a conclusion of what we have drawn from the model.

**Advisor:** Craig Burnside |** JEL Codes:** G1,G13, G15 |** Tagged: **Exchange Rates, Forward Premium Anomoly

## Does Capital Control Policy Affect Real Exchange Rate Volatility? A Novel Approach Using Propensity Score Matching

**By Adam Gross**

Propensity score matching is a statistical technique recently introduced in the field of economics, which researchers use to assess the treatment effect of policy initiatives. In this study I use propensity score matching to analyze the treatment effect of capital control policy on real exchange rate volatility. I find the treatment effect of adopting relatively liberal capital controls is a decrease in real exchange rate volatility. This is the first empirical study to provide insight into the causal relationship between capital controls and real exchange rates, which may be crucial to macroeconomic policy decisions for emerging economies such as China.

**Advisor: **Craig Burnside | **Tagged: **Capitol Controls, Propensity Score Matching, Real Exchange Rate, Treatment Effects