We study the interaction of multiple large economies in dynamic stochastic general equilibrium. Each economy has a monetary policymaker that attempts to control the economy through the use of a linear nominal interest rate feedback rule. The main results show how the determinacy of worldwide...

We study a stylized theory of the volatility reduction in the U.S. after 1984?the Great Moderation?which attributes part of the stabilization to less volatile shocks and another part to more difficult inference on the part of Bayesian households attempting to learn the latent state of the...

The U.S economy has accumulated in recent years seemingly excessive levels of household debt. U.S monetary policy has responded to the situation by keeping real interest rates low. Critics of the low real interest rate policy contend that such a policy helps borrowers and punishes savers, thus...

We study a theory in which households borrow during the first half of a 241-period life cycle as part of a DSGE. Households confront a persistent regime-switching process on aggregate labor productivity growth. When the economy switches to the high growth regime, there is more borrowing based on...

We study a stylized theory of the volatility reduction in the U.S. after 1984---the Great Moderation---which attributes part of the stabilization to less volatile shocks and another part to more difficult inference on the part of Bayesian households attempting to learn the latent state of the...

In this paper we document rise in wage inequality in Australia over the last decade. A key driver of this inequality is unobservable or residual inequality. We decompose residual wage inequality into permanent and transitory components. The estimates of the permanent shock from the first...