Why do the countries of the world display considerable disparity in long term growth rates? This paper examines the hypothesis that the answer lies in differences in national public policies which affect the incentives that individuals have to accumulate capital in both its physical and human...

An understanding of the <i>qualitative</i> nature of the transitional dynamics of the neociassical model - the process of convergence from an initial capital stock to a steady state growth path - is a key part of the shared knowledge of most economists. It forms the basis, for example, of the...

This paper conducts a modern variant of the test proposed and carried out by Adelman and Adelman (1959). Using the methods developed by Burns and Mitchell (1946). we see if we can distinguish between the economic series generated by an actual economy and those analogous artificial series...

Recent developments in macroeconomic theory emphasize that transient economic fluctuations can arise as responses to changes in long run factors -- in particular, technological improvements -- rather than short run factors. This contrasts with the view that short run fluctuations and shifts in...

We present a new approach to the approximation of equilibrium solutions to nonlinear rational expectations models that applies to any order of approximation. The approach relies on a particular version of Taylor series approximations - the differential version - and on a scalar perturbation of...

In a plain-vanilla New Keynesian model with two-period staggered price-setting, discretionary monetary policy leads to multiple equilibria. Complementarity between the pricing decisions of forward-looking firms underlies the multiplicity, which is intrinsically dynamic in nature. At each point...

The Real Business Cycle (RBC) research program has grown specularly over the last decade, as its concepts and methods have diffused into mainstream macroeconomics. Yet, there is increasing skepticism that technology shocks are a major source of business fluctuations. This chapter exposits the...

Are business cycles mainly the result of permanent shocks to productivity? This paper uses a long-run restriction implied by a large class of real-business-cycle models--identifying permanent productivity shocks as shocks to the common stochastic trend in output, consumption, and investment--to...

Optimal monetary policy maximizes the welfare of a representative agent, given frictions in the economic environment. Constructing a model with two sets of frictions-costly price adjustment by imperfectly competitive firms and costly exchange of wealth for goods-we find optimal monetary policy...

Many kinds of economic behavior involve discrete and occasional individual choices. Despite this, econometric partial adjustment models perform relatively well at the aggregate level. Analyzing the classic employment adjustment problem, we show how such microeconomic adjustment is well described...