Farmer and Nicolò (2018) show that the Farmer Monetary (FM)- model outperforms the three-equation New-Keynesian (NK)-model in post war U.S. data. In this paper, we compare the marginal data density of the FM-model with marginal data densities for determinate and indeterminate versions of the...

We explore two issues triggered by the crisis. First, in most advanced countries, output remains far below the pre-recession trend, suggesting hysteresis. Second, while inflation has decreased, it has decreased less than anticipated, suggesting a breakdown of the relation between inflation and...

This paper examines shifts in the output effects of unanticipated inflation in the nineteenth-century United States by estimatinga Lucas-type aggregate supply function over the 1840-1900 period. It is shown that, in contrast to the twentieth-century experience in which there has been a...

Two often-divergent U.S. GDP estimates are available, a widely-used expenditure side version, GDPE, and a much less widely-used income-side version GDPI . We propose and explore a "forecast combination" approach to combining them. We then put the theory to work, producing a superior combined...

This paper examines inflation dynamics in the United States since 1960, with a particular focus on the Great Recession. A puzzle emerges when Phillips curves estimated over 1960-2007 are used to predict inflation over 2008-2010: inflation should have fallen by more than it did. We resolve this...

We evaluate possible explanations for the absence of a persistent decline in inflation during the Great Recession and find commonly suggested explanations to be insufficient. We propose a new explanation for this puzzle within the context of a standard Phillips curve. If firms' inflation...

We study how changes in the value of the steady-state real interest rate affect the optimal inflation target, both in the U.S. and the euro area, using an estimated New Keynesian DSGE model that incorporates the zero (or effective) lower bound on the nominal interest rate. We find that this...

If inflation expectations become firmly anchored at the inflation target even when average inflation deviates from the target, the long-run Phillips curve becomes non-vertical. During 1997-2011, average inflation expectations in Sweden have been close to the inflation target of 2 percent,...

Over the past thirty years, a great deal of business cycle research has been based on purely real models that abstract from the presence of nominal rigidities, and so (at least implicitly) assume that the Phillips curve is vertical. In this paper, I show that such models are fragile, in the...

I consider some of the leading arguments for assigning an important role to tracking the growth of monetary aggregates when making decisions about monetary policy. First, I consider whether ignoring money means returning to the conceptual framework that allowed the high inflation of the 1970s....