We develop a business cycle model in which consumption goods, physical capital, and human capital are produced in separate sectors. An important feature of the model is that human and machine inputs in the production process are treated symmetrically: each has both a stock and flow component....

In this paper, we examine the incentives for central bank activism and caution in a two-country open-economy model with uncertainty and learning. We find that the presence of a strategic interaction between the home and foreign central banks creates an additional motivation for caution in...