Much recent monetary policy analysis has featured stochastic simulations with small structural macroeconomic models that include: a spending vs. saving ( IS') sector; a price-adjustment sector; and an interest rate policy rule. The first two are frequently specified so as to reflect optimizing...

We derive closed-form solutions and sufficient statistics for inflation and GDP dynamics in multi-sector New Keynesian economies with arbitrary input-output linkages. Analytically, we decompose how production linkages (1) amplify the persistence of inflation and GDP responses to monetary and...

We show that policy uncertainty about how the rising public debt will be stabilized accounts for the lack of deflation in the US economy at the zero lower bound. We first estimate a Markov-switching VAR to highlight that a zero-lower-bound regime captures most of the comovements during the Great...

This paper studies the relationship between real wages and unernployment in Europe. It finds no evidence that high real wages are responsible for the differing behavior of unemployment in Europe as contrasted with the U. S., and across European countries finds patterns of real wage behavior that...

U.S. labor and total-factor productivity growth slowed prior to the Great Recession. The timing rules out explanations that focus on disruptions during or since the recession, and industry and state data rule out "bubble economy" stories related to housing or finance. The slowdown is located in...

It has long been argued that cyclical fluctuations in labor and capital utilization and the presence of overhead labor and capital are important for explaining procyclical productivity. Here I present two simple and direct tests of these hypotheses, and a way of measuring the relative importance...

Historical data and model simulations support the following conclusion. Inflation is low during stock market booms, so that an interest rate rule that is too narrowly focused on inflation destabilizes asset markets and the broader economy. Adjustments to the interest rate rule can remove this...

In the 1970s, large increases in the price of oil were associated with sharp decreases in output and large increases in inflation. In the 2000s, and at least until the end of 2007, even larger increases in the price of oil were associated with much milder movements in output and inflation. Using...

It has been argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent great recession. We challenge this argument by showing that a standard DSGE model with financial frictions available prior to the recent crisis...