Several prominent economists have 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...

This paper explains the key factors that determine the output multiplier of government purchases in New Keynesian models, through a series of simple examples that can be solved analytically. Sticky prices or wages allow for larger multipliers than in a neoclassical model, though the size of the...

We consider the effects of central bank purchases of a risky asset as an additional dimension of policy alongside "conventional" interest rate policy in a general-equilibrium model of asset pricing with endogenous collateral constraints. The effects of asset purchases depend on the way that they...

While macroeconomics is often thought of as a deeply divided field, with less of a shared core and correspondingly less cumulative progress than other areas of economics, in fact, there are fewer fundamental disagreements among macroeconomists now than in past decades. This is due to important...