This study explores the macroeconomic implications of adaptive expectations in a standard real business cycle model. When rational expectations are replaced by adaptive expectations, we show that the self-confirming equilibrium is the same as the steady state rational expectations equilibrium...

We argue that positive co-movements between land prices and business investment are a driving force behind the broad impact of land-price dynamics on the macroeconomy. We develop an economic mechanism that captures the co-movements by incorporating two key features into a DSGE model: We...

Historical data indicate a strong relationship between the age distribution of the U.S. population and stock market performance. A key demographic trend is the aging of the baby boom generation. As they reach retirement age, they are likely to shift from buying stocks to selling their equity...

Since 2009, U.S. job vacancies have increased but unemployment has fallen more slowly than in past recoveries. There is evidence that heightened uncertainty about economic policy has been an important factor behind this change. Increased uncertainty may discourage businesses from filling...

China prohibits its private sector from freely trading foreign assets and tightly manages currency exchange rates. In the wake of the recent global financial crisis, interest rates on China’s foreign assets fell sharply, while yields on Chinese domestic assets remained relatively high, posing...

Heightened uncertainty acts like a decline in aggregate demand because it depresses economic activity and holds down inflation. Policymakers typically try to counter uncertainty's economic effects by easing the stance of monetary policy. But, in the recent recession and recovery, nominal...

Recent surges in food and energy prices have pushed up headline inflation to levels well above its underlying trend. In contrast, core inflation, which excludes food and energy prices, has remained low and stable. Historical data suggest that, since the early 1990s, headline inflation has tended...