This paper reconsiders the Phelps-Lucas hypothesis, according to which temporary real effects of purely nominal disturbances result from imperfect information, but departs from the assumptions of Lucas (1973) in two crucial respects. Due to monopolistically competitive pricing, higher-order...

If changes in aggregate demand were an important source of macroeconomic fluctuations, real wages would be countercyclical unless markups of price over marginal cost were themselves countercyclical. We thus examine three theories of markup variation at cyclical frequencies. The first assumes...

Over the past century, the world economy has passed through a succession of phases characterized by very different levels of international capital flows. This paper asks what accounts for these dramatic shifts in the extent of capital movements across national borders, three categories of...

We compute the forecastable changes in output, consumption, and hours implied by a VAR that includes the growth rate of private value added, the share of output that is consumed, and the detrended level of private hours. We show that the size of the forecastable changes in output greatly exceeds...

This paper shows that the output losses from energy taxes are significantly larger than usually computed when due account is taken of imperfect competition among energy using firms. Even with perfect competition among these firms, the loss in GNP is of the same order of magnitude as the revenue...

This paper considers whether the development of electronic money' poses any threat to the ability of central banks to control the value of their national currencies through conventional monetary policy. It argues that even if the demand for base money for use in facilitating transactions is...

This paper considers the desirability of the observed tendency of central banks to adjust interest rates only gradually in response to changes in economic conditions. It shows, in the context of a simple model of optimizing private-sector behavior, that such inertial policy can be optimal. The...

While many analyses of monetary policy consider only a target for a short-term nominal interest rate, other dimensions of policy have recently been of greater importance: changes in the supply of bank reserves, changes in the assets acquired by central banks, and changes in the interest rate...