We propose a fresh way of thinking about the monetary transmission mechanism. By integrating Keynesian economics with general equilibrium theory in a new way, we provide an alternative model and an alternative narrative to New-Keynesian economics to explain how macroeconomic policy influences...

This paper shows that nominal price rigidity can arise from a failure to coordinate price changes. If a firm's desired price is increasing in others' prices, then the gains to the firm from adjusting its price after a nominal shock are greater if others adjust. This "strategic complementarity"...

Can increased uncertainty about the future cause a contraction in output and its components? An identified uncertainty shock in the data causes significant declines in output, consumption, investment, and hours worked. Standard general-equilibrium models with flexible prices cannot reproduce...

The fact that most of the persistent declines in output since the Great Recession have parlayed into equivalent declines in measures of potential output is commonly interpreted as implying that output will not return to previous trends. Using a variety of estimates of potential output for the...

In modern economies, sharp increases in unemployment from major adverse shocks result in long periods of abnormal unemployment and low output. This chapter investigates the processes that account for these persistent slumps. The data are from the economy of the United States, and the discussion...

This paper rejects the proposition that there is only a single interesting question to ask about the decade of the 1930s. It is concerned not only with the role of money in the 1929-33 contraction but also with the relative role of monetary and nonmonetary factors in the recession of 1937-38 and...

This paper uses the old-Keynesian representative agent model developed in Farmer (2010b) to answer two questions: 1) do increased government purchases crowd out private consumption? 2) do increased government purchases reduce unemployment? Farmer compared permanent tax financed expenditure paths...

The Covid-19 crisis is an unusual and seemingly all-encompassing economic shock. On the one hand, it was unquestionably a negative demand shock that, for fixed prices and incomes, reduced household spending. On the other hand, it was also unquestionably a negative supply shock that reduced...

This Chartbook, which is a companion piece to Carmen M. Reinhart and Takeshi Tashiro (2013) "Crowding Out Redefined: The Role of Reserve Accumulation," focuses on nine Asian economies: China, India, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore and Thailand. Like its predecessor...

This paper investigates the potential impacts of the degree of divergence in open macroeconomic policies in the context of the trilemma hypothesis. Using an index that measures the relative policy divergence among the three trilemma policy choices, namely monetary independence, exchange rate...