This paper evaluates the dynamic response of worker flows, job flows, and vacancies to aggregate shocks in a structural vector autoregression. We identify demand, monetary, and technology shocks by imposing sign restrictions on the responses of output, inflation, the interest rate, and the...

We present a model of endogenous total factor productivity which generates poverty traps. We obtain multiple steady-state equilibria for an arbitrarily small degree of increasing returns to scale. While the most productive firms operate across all the steady states, in a poverty trap less...

Entry costs vary dramatically across countries. To assess their impact we construct a model with endogenous entry and operation decisions by firms and calibrate it to match the U.S. distribution of firms by age and size. Higher entry costs lead to greater misallocation of productive factors and...

We argue that the Great Inflation experienced by both the United Kingdom and the United States in the 1970s has an explanation valid for both countries. The explanation does not appeal to common shocks or to exchange rate linkages, but to the common doctrine underlying the systematic monetary...

Developments in open-economy modeling, and the accumulation of experience with the monetary policy regimes prevailing in the United Kingdom and the euro area, have increased our ability to evaluate the effects that joining monetary union would have on the U.K. economy. This paper considers the...

We jointly test the rationality of the Federal Reserve’s Greenbook forecasts of infiation, unemployment, and output growth using a multivariate nonseparable asymmetric loss function. We find that the forecasts are rationalizable and exhibit directional asymmetry. The degree of asymmetry...

We estimate the dynamic stochastic general equilibrium model of Christiano, Eichenbaum, and Evans (2005) on United Kingdom data. Our estimates suggest that price stickiness is a more important source of nominal rigidity in the U.K. than wage stickiness. Our estimates of parameters governing...

We use structural vector autoregressions to analyze the responses of worker flows, job flows, vacancies, and hours to shocks. We identify demand and supply shocks by restricting the short-run responses of output and the price level. On the demand side we disentangle a monetary and non-monetary...

A defining feature of business cycles is the comovement of inputs at the sectoral level with aggregate activity. Standard models cannot account for this phenomenon. This paper develops and estimates a two-sector dynamic general equilibrium model that can account for this key regularity. My model...

We analyze optimal discretionary monetary policy in an endogenous sticky prices model. Similar models with exogenous sticky prices can deliver multiple equilibria. This is a necessary condition for the occurrence of expectation traps (when private agents’ expectations determine the equilibrium...