This paper compares the role of stochastic volatility versus changes in monetary policy rules in accounting for the time-varying volatility of U.S. aggregate data. Of special interest to us is understanding the sources of the great moderation of business cycle fluctuations that the U.S. economy...

The dynamic stochastic general equilibrium (DSGE) models used to study business cycles typically assume that exogenous disturbances are independent first-order autoregressions. This paper relaxes this tight and arbitrary restriction by allowing for disturbances that have a rich contemporaneous...

In this paper, a New-Keynesian DSGE model for a small open economy integrated in a monetary union is developed and estimated for the Portuguese economy, using a Bayesian approach. Estimates for some key structural parameters are obtained and a set of exercises exploring the model's statistical...

This paper provides new evidence on the rationality of early releases of industrial production (IP) and producer price index (PPI) data. Rather than following the usual practice of examining only first available and fully revised data, we examine the entire revision history for each variable....

During the second half of the twentieth-century economic theory moved increasingly away from price theory, which was gradually displaced by more modern trends such as game theory, behavioral-empirical-experimental economics, neuroeconomics, heterodox economics, etc. This was due to serious...

It is well-established that the presence of deterministic and/or stochastic trends in DSGE models may imply that the agents' objective functions attain infinite values. This is the case even if the subjective discount factor is strictly less than one. Currently, sufficient conditions ensuring...

This paper evaluates the concepts of natural rates of interest and output in Woodford's "neo-Wicksellian" and "benchmark New Keynesian" version of the New Neoclassical Synthesis (NNS) by comparing them with the original approach of Wicksell and critical assessments and adaptations by Lindahl,...

This paper examines the macroeconomic effects of unexpected, exogenous, simultaneous, temporary cuts to income tax rates in an economy when the government follows a balanced budget fiscal rule and keeps money supply constant, and private agents face constraints on the ability to finance...

What drives countercyclical volatility? A large literature has documented that many economic variables are more disperse in recessions, but this could either occur because shocks get bigger or because firms respond more to shocks which are the same size. Existing evidence that the dispersion of...

This article develops a model of unemployment fluctuations. The model keeps the architecture of the general-disequilibrium model of Barro and Grossman (1971) but takes a matching approach to the labor and product markets instead of a disequilibrium approach. On the product and labor markets,...