This dissertation investigates the dynamic impacts of governmental policy interventions on the economy.

In chapter 1, we present an overlapping-generations model with endogenous retirement to study the effects of PAYG pensions on the capital-labor ratio and welfare in a dynamically efficient economy. In such an environment, we show that it is possible for the PAYG pension system to be neutral. It may even be desirable in a long-run welfare sense. These results are in sharp contrast with existing, well-known results.

In chapter 2, we describe a business as usual (BAU) overlapping-generations economy in which pollution is the fallout of productive activity. Over time, conditions in the BAU economy get worse: it gets increasingly polluted, consumption falls and generational welfare levels decline. A government introduces costly pollution abatement in the BAU world and finances it via labor taxes and borrowing on perfect international markets. Pollution levels start to decline and this generates downstream welfare gains which the government can tax away to help pay off the debt, that too, in finite time. A new world emerges; it has lower pollution and higher consumption than in the BAU. More importantly, every generation is happier than they would be had life continued in the BAU world.

In chapter 3, using monthly data from Jan 1996 to Dec 2014, we analyze and compare the long-run equilibrium relationship and short-run dynamics in a system of Shanghai Stock Exchange Composite Index, industrial production growth rate, international crude oil price, real exchange rates growth rate and real interest rate before and after the exchange rate regime shift in July 2005 in China.