Several empirical papers have established the fact of a negative price-output correlation for the United States in the post WWII era. Much of this work appears to interpret the sign of this correlation under the assumption that monetary policy is passive. This paper uses a simple aggregate...

Several authors have reported finding a negative correlation between prices and output for the U.S. in the post WW II data. This paper presents a simple aggregate supply and demand model to show that this correlation may reflect the actions of an optimizing monetary policy maker rather than the...

Using quarterly data this paper re-examines the series of (exogenous) federal funds rate shocks created by Romer and Romer (AER, 2004). First, this paper finds that the Romer and Romer series passes two specification tests: they have no long-run effect on output and are eventually completely...