Changes in government spending often lead to significant shifts in demand across sectors. This paper analyzes the effects of sector-specific changes in government spending in a two-sector dynamic general equilibrium model in which the reallocation of capital across sectors is costly. The...

The Consumer Price Index does not take into account the fact that consumers alter the composition of their purchases in response to changes in relative prices. This substitution effect will cause the CPI to grow faster than the cost of living. This paper presents new estimates showing that this...

Individuals' preferences underlying most economic behavior are likely to display substantial heterogeneity. This paper reports on direct measures of preference parameters relating to risk tolerance, time preference, and intertemporal substitution. These experimental measures are based on survey...

Until recently, economists widely believed that economic activity had become less variable in the United States following the end of World War II. Challenging this belief, new research suggests that key historical time series are spuriously volatile, a finding that is highly controversial. Data...

What shocks account for the business cycle frequency and long run movements of output and prices? This paper addresses this question using the identifying assumption that only supply shocks, such as shocks to technology, oil prices, and labor supply affect output in the long run. Real and...

Measured productivity is strongly procyclical. Real business cycle theories suggest that actual fluctuations in productivity are the source of fluctuations in aggregate output. Keynesian theories maintain that fluctuations in aggregate output come from shocks to aggregate demand. Keynesian...

The interaction between the macroeconomy and asset markets is central to a variety of modern theories of the business cycle. Much recentwork emphasizes the joint nature of the consumption decision and the portfolio allocation decision. In this paper, we compare two formulations of the Capital...

This paper jointly estimates the relationship between stock share and expectations and risk preferences. The survey allows individual-level, quantitative estimates of risk tolerance and of the perceived mean and variance of stock returns. These estimates have economically and statistically...

Recent fiscal policies, including the 2008 stimulus payments and the 2009 Making Work Pay tax credit, aimed to increase household spending. This paper quantifies the spending response to these policies and examines differences in spending by whether the stimulus was delivered as a one-time...

The value of installed computers falls rapidly and therefore computers have a very high user cost. The paper provides a complete account of the non-financial user cost of personal computers -- decomposing it into replacement cost change, obsolescence, instantaneous depreciation, and age-related...