We estimate a DSGE model where rare large shocks can occur, but replace the commonly used Gaussian assumption with a Student´s t-distribution. Results from the Smets and Wouters (2007) model estimated on the usual set of macroeconomic time series over the 1964-2011 period indicate that 1) the...

We provide a novel methodology for estimating time-varying weights in linear prediction pools, which we call dynamic pools, and use it to investigate the relative forecasting performance of dynamic stochastic general equilibrium (DSGE) models, with and without financial frictions, for output...

The scale of the recent collapse in asset values and the magnitude of the recession suggest that activities connected to the increase in values over the 2002-07 period - notably, expansion of the financial markets, homebuilding, and real estate - were overstated. If this is true, aggregate U.S....

This paper revisits the hypothesis that changes in inventory management were an important contributor to volatility reductions during the Great Moderation. It documents how changes in inventory behavior contributed to the stabilization of the U.S. economy within the durable goods sector, in...

Stabilization policies frequently aim to boost spending as a means to increase GDP. Spending does not necessarily translate into production, however, especially when inventories are involved. We look at the “Cash-for-Clunkers” program that helped finance the purchase of nearly 700,000...

This paper presents new survey evidence on workers' response to the 2011 payroll tax cuts. While workers intended to spend 10 to 18 percent of their tax-cut income, they reported actually spending 28 to 43 percent of the funds. This is higher than estimates from studies of recent tax cuts, and...

Using a comprehensive panel dataset on U.S. households, we study the effects of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), the most substantive reform of personal bankruptcy in the United States since the Bankruptcy Reform Act of 1978. The 2005 legislation...

The paper considers the macroeconomic transmission of demand and supply shocks in an open economy under alternative assumptions about whether the zero interest rate floor (ZIF) is binding. It uses a two-country general-equilibrium simulation model calibrated to the Japanese economy relative to...

Tax cuts can deepen a recession if the short-term nominal interest rate is zero, according to a standard New Keynesian business cycle model. An example of a contractionary tax cut is a reduction in taxes on wages. This tax cut deepens a recession because it increases deflationary pressures....

Using credit report records and data collected from several household surveys, we analyze changes in household debt and saving during the 2007 recession. We find that, while different segments of the population were affected in distinct ways, depending on whether they owned a home, whether they...