With an estimated New Keynesian model, this paper compares the "Great Recession" of 2007-09 to its two immediate predecessors in 1990-91 and 2001. The model attributes all three downturns to a similar mix of aggregate demand and supply disturbances. The most recent series of adverse shocks...

This paper uses a New Keynesian model with banks and deposits to study the macroeconomic effects of policies that pay interest on reserves. While their effects on output and inflation are small, these policies require major adjustments in the way that the monetary authority manages the supply of...

Milton Friedman's permanent income hypothesis implies that data on savings help forecast future income growth. An econometric model that exploits this implication predicts that the U.S. economy will continue to expand in 1995

A simple model of the price level illustrates how Milton Friedman's k-percent monetary policy rule provides for price stability. His rule can, in particular, largely eliminate the problem of long-run price-level uncertainty emphasized by Irving Fisher

This paper develops a general equilibrium model in which households face fixed costs associated with searching for a new supplier of consumption goods. These search costs provide firms with some monopoly power over their existing customers and generate the kind of customer flow dynamics first...

This paper characterizes optimal monetary policy in the context of a general equilibrium model with optimizing agents and staggered price setting. Starting from a steady state with positive inflation, a rapid disinflation is desirable when announcements of future monetary policy are fully...

Recently there has been renewed interest in using general equilibrium models to understand the effects of monetary policy on interest rates and real economic activity. This research effort involved the search for models that will account for the liquidity effects -- the decrease in short-term...

Innovations in the private financial sector influence the income velocity of money in an economy over the entire course of its development. In the early stages of growth, increased monetization, as manifested by the spread of the banking system, causes velocity to fall. Later, the emergence of...

A contemporary extension of Irving Fisher's theory of interest identifies three determinants of long-term nominal bond yields: long-term real interest rates, risk premia, and long-term inflationary expectations. Empirically, however, the long-term real rate is quite stable and the risk premium...

Two growth models provide very different perspectives on the link between tax rates and macroeconomic performance. A model developed by Robert Solow predicts that changes in taxes affect the level, but not the growth rate, of aggregate output. A model that draws on the ideas of Frank Knight...