Using data from Backus and Kehoe (1992) we establish the existence of a positive relationship between the price-output correlation and the variance of output. This is consistent with the idea that reductions in the magnitude of aggregate demand shocks have been the dominant cause of changes in...

It is widely accepted that the character of U.S. business cycles has changed in the post World War II era. In particular, as measured by the NBER business cycle dates, business expansions have grown from an average of 26.5 months in the prewar period to 51.5 months in the post-war period....

It is commonly believed that a monetary policy that targets the price level reduces the long-term variability of the price level but only at the cost of increased variability in both inflation and output. This paper shows that this result may not hold so long as increases in the real rate of...

Several authors have reported finding a negative correlation between prices and output for the U.S. in the post WW II data. This paper presents a simple aggregate supply and demand model to show that this correlation may reflect the actions of an optimizing monetary policy maker rather than the...

This paper uses an intertemporal model of public finances to show that political instability can cause taxes to be tilted to the future, resulting in a fiscal deficit that is suboptimal and only weakly sustainable (in the sense of Quintos). This occurs because political instability gives the...

This paper employs tests for Granger-Sims causality and a four-variable vector-autoregression (VAR) to examine whether real government spending and real net taxes have any systematic effect on output purchased by the private sector. The paper finds no evidence of causality from government...

Using quarterly data this paper re-examines the series of (exogenous) federal funds rate shocks created by Romer and Romer (AER, 2004). First, this paper finds that the Romer and Romer series passes two specification tests: they have no long-run effect on output and are eventually completely...

Lengwiler (2005) presents a model of an endowment economy in which economic actors have different degrees of patience. The model implies that the social discount rate declines as the time horizon increases and that the resulting term structure of the interest rate cannot be produced by a...