We construct a perpetual youth DSGE model with aggregate uncertainty in which there are dynamically complete markets and agents have Epstein-Zin preferences. We prove that, when endowments have a realistic hump-shaped age-profile, our model has three steady-state equilibria. One of these...

This paper presents empirical evidence from U.S. data of a structurally stable aggregate supply relationship between real and nominal rates of interest and the rate of unemployment. The paper reviews theories of contracts that are based on the twin assumptions of asymmetric information and...

For the past thirty years of the history of macroeconomic thought, the Indeterminacy School of Macroeconomics has used general equilibrium models with indeterminate equilibria to understand the independent role of beliefs in shaping macroeconomic outcomes. In this paper I review the most recent...

I introduce money into an incomplete markets model with heterogeneous agents and uninsurable income risk. I show that the model exhibits both non-monetary and monetary equilibria, with the latter existing when income risk is sufficiently high. Using numerical methods, I characterize the...

We construct a model where people trade assets contingent on an observable signal that reflects public opinion. The agents in our model are replaced occasionally and each person updates beliefs in response to observed outcomes. We show that the distribution of the observed signal is described by...

We develop a technique for analyzing the response dynamics of economic variables to structural shocks in linear rational expectations models. Our work differs from standard SVARs since we allow expectations of future variables to enter structural equations. We show how to estimate the...

New-Keynesian models are characterized by the presence of expectations as explanatory variables. To use these models for policy evaluation, the econometrician must estimate the parameters of expectation terms. Standard estimation methods have several drawbacks, including possible lack of...

We study identification in a class of three-equation monetary models. We argue that these models are typically not identified. For any given exactly identified model, we provide an algorithm that generates a class of equivalent models that have the same reduced form. In our first two examples we...

A number of authors have attempted to test whether the U.S. economy is in a determinate or an indeterminate equilibrium. We argue that to answer this question, one must impose a priori restrictions on lag length that cannot be tested. We provide examples of two economic models. Model 1 displays...