Recent cross-country studies on the globalization and output-inflation tradeoff correlation find openness has no significant effect on OECD countries. Those studies assume parameter constancy across countries. In this paper, we argue that this assumption does not hold for major industrialized...

The Paper extends Woodford’s (2000) analysis of the closed economy Phillips curve to an open economy with both commodity trade and capital mobility. We show that consumption smoothing, which comes with the opening of the capital market, raises the degree of strategic complementarity among...

The Paper derives an open economy New-Keynesian Phillips curve. The Phillips curve depends on growth in the domestic economy excess capacity, differential growth between foreign output and domestic output, and on the surprise depreciation of the real exchange rate. The Paper provides new...

We examine the relationship between macroeconomic, institutional, and cultural indicators and cyclical fluctuations for European, Middle Eastern and North African Mediterranean countries. Mediterranean cycles are different from EU cycles: the duration of expansions is shorter; the amplitude and...

This Paper studies how the HP-Filter should be adjusted, when changing the frequency of observations. It complements the results of Baxter and King (1999) with an analytical analysis, demonstrating that the filter parameter should be adjusted by multiplying it with the fourth power of the...

Using survey-based measures of future U.S. economic activity from the Livingston Survey and the Survey of Professional Forecasters, we study how changes in expectations, and their interaction with monetary policy, contribute to fluctuations in macroeconomic aggregates. We find that changes in...

We use a standard quantitative business cycle model with nominal price and wage rigidities to estimate two measures of economic inefficiency in recent U.S. data: the output gap---the gap between the actual and efficient levels of output---and the labor wedge---the wedge between households'...

Woodford (1999) develops the notion of a "timelessly optimal" pre-commitment policy. This paper uses a simple business cycle model to illustrate this notion. We show that timelessly optimal policies are not unique and that they are not necessarily better than the time-consistent solution....

This paper develops a small forward-looking macroeconomic model where the Federal Reserve estimates the level of potential output in real time by running a regression on past output data. The Fed's perceived output gap is used as an input to the monetary policy rule while the true output gap...