Real business cycle models have recently been applied to settings in which equilibria are suboptimal. In most models the solutions are approximated using some type of linearization with little attention being given to the accuracy of the approximation. In this paper we investigate three...

The behavior of the Federal Reserve System can be characterized as secretive with respect to its control of monetary aggregates. One common justification for this secrecy is that markets will overreact to information, causing undue variability in interest rates. However, the consequences of...

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....

We show in a quantitative open-economy model that standard alternative assumptions about the currency in which firms price export goods are virtually inconsequential for the properties of aggregate variables, other than the terms of trade. This result is in contrast to a large literature that...