Recently, Barsky et al. (2007) found that a sticky-price model does not generate sectoral co-movement and that the propagation mechanism is weak in response to monetary shocks if prices in the durable goods sector are significantly flexible, which raises a co-movement problem in sticky-price...

Financial markets and pay-as-you-go social security are two alternative ways to provide for retirement. The size of social security programs could therefore be partly determined by the level of financial frictions. I explore this possibility by using legal origin as a proxy for financial...

This study conducts an investigation into the extent of cointegration between imports and exports and asymmetries in the adjustment of the U.S. current account over the study period 1960Q4-2007Q2. We find evidence in favor of cointegration through the application of the standard Johansen...

Motivated by structural instability in the energy price - macroeconomy nexus, this paper revisits Granger causality between unemployment and real input prices, the real prices of energy (crude oil) and capital (real interest rate). Time varying Granger causality is investigated through...

This paper documents the existence of a significant forecast error on crude oil futures. We interpret it as a risk premium, which, in part, could have been explained by means of a real-time U.S. business cycle indicator, such as the degree of capacity utilization in manufacturing. This result is...

We compute the marginal product of capital (MPK) taking into account cross-country differences in the relative price of capital in a large panel including 95 countries over the period 1970-2000. Estimates of the price-uncorrected MPK suggest that the marginal product of capital is much larger in...

This paper shows that convexity of the short-run Phillips curve is a source of positive inflation bias even when policymakers target the natural unemployment rate, that is when they operate with prudent discretion, and their loss function is symmetric. Optimal monetary policy also induces...

A number of inflation targeting central banks operate under provisions that allow for increased flexibility when faced with large supply shocks. These so-called escape clauses, however, are usually hard to interpret and discretionary in nature. This paper argues that a practical and more viable...

This paper investigates the source of historical fluctuations in annual UK labor productivity and employment data extending back to the 19th century. Long-run identifying restrictions are used to decompose shocks into technology shocks and other shocks. The UK results show more sample stability...

Since the mid-1980s firm level financial volatility has increased, while the U.S. economy has experienced a sharp decline in the volatility of GDP growth. Do firms adjust their capital structure in response to higher idiosyncratic risk? And if so, could that affect the performance of the...