There's a common belief among economists that when there’s slack in the economy — that is, when labor and capital are not fully employed — the economy can expand without an increase in inflation. One measure of the intensity with which labor and capital are used in producing output is the...

In “A Review of Inflation Targeting in Developed Countries,” Mike Dotsey examines five countries that have been targeting inflation for at least 10 years and whose inflation rates, though fairly well contained before inflation targeting, were nonetheless considered too high by policymakers....

Though built with increasingly precise microfoundations, modern optimizing sticky price models have displayed a chronic inability to generate large and persistent real responses to monetary shocks, as recently stressed by Chari, Kehoe, and McGrattan [2000]. This is an ironic finding, since...

In the last ten years there has been an explosion of empirical work examining price setting behavior at the micro level. The work has in turn challenged existing macro models that attempt to explain monetary nonneutrality, because these models are generally at odds with much of the micro price...

This paper incorporates home production into a dynamic general equilibrium model of overlapping generations with endogenous retirement to study Social Security reforms. As such, the model differentiates both consumption goods and labor effort according to their respective roles in home...

Empirical evidence suggests that movements in international relative prices are large and persistent. Nontraded goods, both in the form of final consumption goods and as an input into the production of final tradable goods, are an important aspect driving international relative price movements....

Until recently, when assessing the economic effects of monetary policy, economists have emphasized the role of unanticipated changes in policy. But are these policy shocks likely to be the most important influence on the economy? Mike Dotsey believes not. It seems more likely that the Fed's...

Whether policymakers should commit to a certain course of action or have the flexibility to approach each situation as it arises continues to be a central question in the design of monetary policy. A seminal article written by two prominent economists in 1977 analyzed the benefits of carrying...