We conducted business cycle accounting (BCA) using the method developed by Chari, Kehoe, and McGrattan (2002a) on data from the 1980s--1990s in Japan and from the interwar period in Japan and the United States. The contribution of this paper is twofold. First, we find that labor wedges may have...

This paper introduces a form of boundedly-rational expectations into an otherwise standard New-Keynesian Phillips curve. The representative agent's forecast rule is optimal (in the sense of minimizing mean squared forecast errors), conditional on a perceived law of motion for inflation and...

First-order approximations to the solution to a Dynamic Stochastic General Equilibrium Model (DGSE) are now widely used in the literature. In particular, the solution is usually based on the standard log-linearisation procedure around the steady-state. However, it may be not enough especially...

I provide empirical evidence that badly governed firms respond more to aggregate shocks than do well governed firms. I build a simple model where managers are prone to over-invest and where shareholders are more willing to tolerate such a behavior in good times. The model successfully explains...

This paper reexamines the role of open market operations for short-run effects of monetary policy in a New Keynesian framework. The central bank supplies money in exchange for securities that are discounted with the short-run nominal interest rate, while money demand is induced by a liquidity...

In this paper we measure the welfare cost of fluctuations in a simple representative agent economy with nonclearing markets. The market friction we consider involves price rigidities and a voluntary exchange rationing scheme. These features are incorporated into an otherwise standard...

I construct a heterogeneous agents economy that mimics the time-series behavior of the US earnings distribution from 1963 to 2003. Agents face aggregate and idiosyncratic shocks and accumulate real and financial assets. I estimate the shocks driving the model using data on income inequality, on...

The paper sets out a monetary business cycle model extended to include the production of credit that serves as an alternative to money in transactions and is subject to productivity shocks. The model provides some improvement on certain puzzles, in particular by capturing the procyclic movements...