Macroeconomists have long recognized that activity-gap measures are unreliable in real time and that this can present serious difficulties for stabilization policy. This paper investigates whether the credit-to-GDP ratio gap, which has been proposed as a reference point for accumulating...

The effect of bank capital on lending is a critical determinant of the linkage between financial conditions and real activity, and has received especial attention in the recent financial crisis. We use panel regression techniques—following Bernanke and Lown (1991) and Hancock and Wilcox (1993,...

The data across time and countries suggest the level and variance of inflation are highly correlated. This paper examines the effect of trend inflation on the ability of the monetary authority to ensure a determinate equilibrium and inflation stability in a sticky-price model. Trend inflation...

I develop empirical models of the U.S. economy that distinguish between the aggregate demand effects of short- and long-term interest rates—one with clear “microfoundations” and one more loosely motivated. These models are estimated using government and private long-term bond yields....