The research led by Gali (AER 1999) and Basu, Fernald, and Kimball (AER 2006) raises two important questions regarding the validity of the RBC theory: (i) How important are technology shocks in explaining the business cycle? (ii) Do impulse responses to technology shocks found in the data reject...

Chari, Kehoe, and McGratten's (1998) finding that a standard monetary business cycle model with staggered price setting is unable to generate sufficiently persistent real effects of monetary shocks has engendered a growing literature aimed at developing alternative mechanisms for producing...

This paper examines the impact of sticky price and limited participation frictions, both separately and combined, in a dynamic stochastic general equilibrium model. Using U.S. data on output, inflation, interest rates, money growth, consumption, and investment, likelihood ratio tests and...

This paper develops a real business cycle model characterized by idiosyncratic employment shocks and quantitatively explores the behavior of aggregate variables under the assumptions of complete and incomplete insurance markets. The results show that the model with incomplete markets produces...

This paper estimates and simulates a sticky-price dynamic stochastic general-equilibrium model with a financial accelerator, a la Bernanke, Gertler, and Gilchrist (1999), to assess the importance of the financial accelerator mechanism in fitting the data and its role in the amplification and...

We build a New Keynesian model of the business cycle with sticky prices and real wage rigidities motivated by efficiency wages of the gift exchange variety. Compared to a standard sticky price model, our Fair Wage model provides an explanation for structural unemployment and generates more...

The papers in this volume study nine depressions - both from the interwar period in Europe and America and from more recent times and Latin America - using a common framework. All of the papers rely on growth accounting to decompose changes in output into the portions due to changes in factor...

This paper considers transition dynamics associated with a change in the rate of technological progress, using a general equilibrium framework that incorporates stochastic technology growth trends. The model suggests that these dynamics are associated with protracted transition periods,...

Argentina suffered a depression in the 1980s that was as severe as the Great Depression experienced in the United States and Germany in the interwar period. Our paper examines this depression from the perspective of growth theory, taking total factor productivity as exogenous. The predictions of...

Recent empirical work finds that R&D expenditures are quite procyclical, even for firms that are not credit-constrained during downturns. This has been taken as strong evidence against Schumpeterian-style theories of business cycles that emphasize the idea that downturns in production may be...