Previous studies have interpreted the rise and fall of U.S. inflation after World War II in terms of the Fed's changing views about the natural rate hypothesis but have left an important question unanswered. Why was the Fed so slow to implement the low-inflation policy recommended by a natural...

Western Europe was plagued with currency shortages from the 14th century, at which a 'standard formula' had been devised to cure the problem. We use a cash-in-advance model of commodity money to define a currency shortage, show that they could develop and persist under commodity money regime,...

Without policy reforms, the aging of the U.S. population is likely to increase the burden of the currently unfunded social security and medicare systems. In this paper we build an applied general equilibrium model and incorporate the population projections made by the Social Security...

We study how a concern for robustness modifies a policymaker's incentive to experiment. A policymaker has a prior over two submodels of inflation-unemployment dynamics. One submodel implies an exploitable trade-off, the other does not. Bayes' law gives the policymaker an incentive to experiment....

Post World War II European welfare states experienced several decades of relatively low unemployment, followed by a plague of persistently high unemployment since the 1980s. We impute the higher unemployment to welfare states' diminished ability to cope with more turbulent economic times, such...

The standard theory of decision making under uncertainty advises the decision maker to form a statistical model linking outcomes to decisions and then to choose the optimal distribution of outcomes. This assumes that the decision maker trusts the model completely. But what should a decision...