The time-series literature reports two stylized facts about output dynamics in the United States: GNP growth is positively autocorrelated and GNP appears to have an important trend-reverting component. This paper investigates whether current real-business-cycle models are consistent with these...

We compare market prices of risk in economies with identical patterns of endowments, priors, and information flows, but two different market structures, one with complete markets, another in which consumers can trade only a single risk-free bond. We study how opportunities to speculate, uncommon...

Purely forward-looking versions of the New Keynesian Phillips curve (NKPC) generate too little inflation persistence. Some authors add ad hoc backwardlooking terms to address this shortcoming. We hypothesize that inflation persistence results mainly from variation in the long-run trend component...