We test whether dynamic, stochastic, general equilibrium artificial economies associated with several labor market institutions provide an adequate characterization of aggregate employment volatility and dynamics. Our test is robust to possible misspecifications about the information set used by...

Several authors argue that international real business cycle (IRBC) models with incomplete financial markets offer a good explanation of the ranking of cross-country correlations. This conclusion is suspect, because it is based on an analysis of the near steady state dynamics using a linearized...

We study the effects of tax shocks on the budget and external deficits for 16 industrialized countries over the post-1975 period. Our structural approach is based on a tractable small open-economy model where a tax cut innovation generates a budget deficit. In turn, the budget deficit affects...

Post-war business cycle fluctuations of output and inflation are remarkably persistent. Many recent sticky-price models, however, grossly underpredict this persistence. We assess whether adding inventories to a standard sticky-price model raises the persistence of output and inflation. For this...

In contrast to earlier work, we study the relation between the current account and interest rate differentials. To do so, we document the relation for international data. We then interpret this relation from a two-country, dynamic, general equilibrium environment. We finally confront the...

In this paper, the ability of a two-country model of growth and cycles is evaluated to explain the persistence properties of output and consumption across countries. Simulated output and consumption levels replicate the observed appearance of noncointegration across countries. Simulated output...