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...

We integrate the housing market and the labor market in a dynamic general equilibrium model with credit and search frictions. The model is confronted with the U.S. macroeconomic time series. Our estimated model can account for two prominent facts observed in the data. First, the land price and...

We estimate a Markov-switching mixture of two familiar macroeconomic models: a richly parameterized DSGE model and a corresponding BVAR model. We show that the Markov-switching mixture model dominates both individual models and improves the fit considerably. Our estimation indicates that the...

Markov-switching DSGE (MSDSGE) modeling has become a growing body of literature on economic and policy issues related to structural shifts. This paper develops a general perturbation methodology for constructing high-order approximations to the solutions of MSDSGE models. Our new method, called...

In the U.S. economy over the past twenty five years, house prices exhibit fluctuations considerably larger than house rents and these large fluctuations tend to move together with business cycles. We build a simple theoretical model to characterize these observations by showing the tight...

We use a Bayesian Markov Chain Monte Carlo algorithm to estimate a model that allows temporary gaps between a true expectational Phillips curve and the monetary authority's approximating non-expectational Phillips curve. A dynamic programming problem implies that the monetary authority's...

This paper is about the properties of Markov switching rational expectations (MSRE) models. We present a simple monetary policy model that switches between two regimes with known transition probabilities. The first regime, treated in isolation, has a unique determinate rational expectations...

We infer determinants of Latin American hyperinflations and stabilizations by using the method of maximum likelihood to estimate a hidden Markov model that potentially assigns roles both to fundamentals in the form of government deficits that are financed by money creation and to destabilizing...

We construct linear projections of macro variables conditional on hypothetical paths of monetary policy, using as an example an identified VAR model. Hypothetical policies are restricted to ones where both the policy intervention and its impacts are consistent with history -- otherwise the...

This paper studies a New-Keynesian model in which monetary policy may switch between regimes. We derive sufficient conditions for indeterminacy that are easy to implement and we show that the necessary and sufficient condition for determinacy, provided by Davig and Leeper, is necessary but not...