This paper constructs a two-country stochastic growth model in which neutraland investment-specic technology shocks are nonstationary but cointegrated acrosseconomies. It uses this model to interpret data showing that while real investmenthas grown faster than real consumption in the United...

Athanasios Orphanides and John C. Williams' excellent conference paper, "Inflation Scares and Forecast-Based Monetary Policy," contributes importantly to the new and rapidly growing branch of the literature on bounded rationality and learning in macroeconomics. Their paper, like many others,...

A two-sector real business cycle model, estimated with postwar U.S. data, identifies shocks to the levels and growth rates of total factor productivity in distinct consumption- and investmentgoods- producing technologies. This model attributes most of the productivity slowdown of the 1970s to...

This paper estimates a New Keynesian model to draw inferences about the behavior of the Federal Reserve's unobserved inflation target. The results indicate that the target rose from 1-1/4 percent in 1959 to over 8 percent in the mid-to-late 1970s before falling back below 2-1/2 percent in 2004....

The monetary transmission mechanism describes how policy-induced changes in the nominal money stock or the short-term nominal interest rate impact real variables such as aggregate output and employment. Specific channels of monetary transmission operate through the effects that monetary policy...

Traditionally, the effects of monetary policy actions on output are thought to be transmitted via monetary or credit channels. Real business cycle theory, by contrast, highlights the role of real price changes as a source of revisions in spending and production decisions. Motivated by the desire...

In the 1920s, Irving Fisher extended his previous work on the Quantity Theory to describe, through an early version of the Phillips Curve, how changes in the money stock could be associated with cyclical movements in output, employment, and inflation. At the same time, Holbrook Working designed...

Discussions of monetary policy rules after the 2007-2009 recession highlight the potential ineffectiveness of a central bank's actions when the short-term interest rate under its control is limited by the zero lower bound. This perspective assumes, in a manner consistent with the canonical New...

A vector autoregression with time-varying parameters is used to characterize changes in Federal Reserve policy that occurred from 2000 through 2007 and describe how they affected the performance of the U.S. economy. Declining coefficients in the model's estimated policy rule point to a shift in...