We build upon recent research that attributes the moderation of output volatility since the 1980s to the reduced volatility of the Total Factor Productivity (TFP) by investigating the linkage between energy price fluctuations and the stochastic process for TFP. First, we estimate a joint...

The observed tightening of interest rates in the aftermath of the post-World War II oil price hikes led some to argue that U.S. monetary policy exacerbated the recessions induced by oil price shocks. This paper provides a critical evaluation of this claim. Within an estimated dynamic stochastic...

The paper constructs a dynamic general equilibrium model to study the endogenous determination of gasoline use, driving and vehicle fuel efficiency. Before vehicles are produced, their fuel efficiency can be chosen optimally. Once produced, their fuel efficiency cannot be changed. The model...

In times series data, energy use does not change much with energy price changes. However, energy use is responsive to international differences in energy prices in cross-section data across countries. In this paper we consider a model of energy use in which production takes place at individual...

Business cycles correlation between Mexico and the US changed from being on a downward sloping path before 1992 to an upward sloping path after that. This paper suggests that the North American Free Trade Agreement could be the explanation. NAFTA generated not only an increase in the volume of...

We show that the aggregate Frisch elasticity of labor supply can greatly exceed the corresponding individual-level parameter, and we illustrate the "anatomy" of the former in terms of intensive and extensive margins. The methodology consists of using micro data from the PSID to construct a panel...

Financial crises in emerging economies are accompanied by a large fall in total factor productivity. We explore the role of financial frictions in exacerbating the misallocation of resources and explaining this drop in TFP. We build a two-sector model of a small open economy with a working...

I construct a two-sector growth model to study the effect of the structural transformation between manufacturing and services on the decline in GDP volatility in the US. In the model, a change in the relative size of the two sectors affects the transmission mechanism that relates sectoral TFP...

This paper compares different solution methods for computing the equilibrium of dynamic stochastic general equilibrium (DSGE) models with recursive preferences such as those in Epstein and Zin (1989 and 1991) and stochastic volatility. Models with these two features have recently become popular,...

This paper investigates the quantitative importance of various types of distortions for inflation and nominal interest rate dynamics by extending business cycle accounting to monetary models. Representing various classes of real and nominal distortions as 'wedges' in standard equilibrium...