In­vi­ta­tion for PhD De­fen­ce - Oskar Arnt Juul

 In order to obtain the PhD degree, Oskar Arnt Juul has submitted his thesis entitled:  

Essays on Nonlinear Business Cycles  

This dissertation starting point is that business cycles are inherently nonlinear and that macroeconomic models should be designed accordingly. Standard DSGE analysis typically relies on local linear approximations around a steady state, which abstract from key features of economic fluctuations such as asymmetries, state dependence, and the effects of large shocks. The thesis develops contributions that place nonlinearity at the center of macroeconomic analysis.  

Chapter 1 (with Juan Carlos Parra-Alvarez), Taylor Projection under Tail Risk, develops a solution method for DSGE models subject to rare but severe aggregate shocks. The approach combines Taylor Projection with continuous-time assumptions to improve the effects of precautionary behavior induced by disaster risk.       

Chapter 2, Timing Matters: Deterministic Debt Cycles and Collateralized Debt Contracts, studies how the timing of collateral valuation shapes macroeconomic dynamics. In a deterministic small open economy, tying borrowing capacity to current asset prices can generate endogenous debt cycles through a Fisherian debt-deflation mechanism. Rising debt eventually depresses collateral values, tightening borrowing constraints and triggering contractions. When collateral is instead valued at future prices, this destabilizing feedback loop disappears and debt cycles cannot arise.  

Chapter 3, Optimal Monetary Policy Subject to Sovereign Default, incorporates sovereign default risk into a New Keynesian model with domestic-currency debt and discretionary fiscal policy. Comparing Ramsey, discretionary, and myopic monetary policies reveals modest deviations from strict inflation targeting, with optimal policy tolerating somewhat higher inflation during recessions to reduce debt burdens.  

The thesis will be available from research.cbs.dk