Recent financial crises in Europe as well as the periodic battles in the U.S. over the debt ceiling point to the importance of fiscal discipline among developed countries. This paper develops an open economy model, calibrated to the U.S. and a subset of the EMU, to evaluate the impact of various...

Calibration has become a standard tool of macroeconomics. This paper extends and refines the calibration methodology along several important dimensions. First, accounting for home production is important both in measuring calibration targets and in organizing the data in a model-consistent...

Real business cycle models have difficulty replicating the volatility of Samp;P 500 returns. This fact should not be surprising since real business cycle theory suggests that the return to capital should be measured by the return to aggregate market capital, not stock market returns. We...

Following the Great Recession, U.S. government debt levels exceeded 100% of output. We develop a macroeconomic model to evaluate the role of various shocks during and after the Great Recession; labor market shocks have the greatest impact on macroeconomic activity. We then evaluate the...