We use an estimated monetary business cycle model with search and matching frictions in the labor market and nominal price and wage rigidities to study four countries (the U.S., the U.K., Sweden, and Germany) during the financial crisis and the Great Recession. We estimate the model over the...

We study the design of monetary policy in an estimated model with sticky prices, search and matching frictions, and staggered nominal wage bargaining. We find that the estimated natural rate of unemployment is consistent with the NBER description of the U.S. business cycle, and that the...

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'...

We estimate the effects of fiscal policy on the labor market in US data. An increase in government spending of 1 percent of GDP generates output and unemployment multipliers respectively of about 1.2 per cent (at one year) and 0.6 percentage points (at the peak). Each percentage point increase...

Equilibrium business cycle models have typically less shocks than variables. As pointed out by Altug, 1989, and Sargent, 1989, if variables are measured with error, this characteristic implies that the model solution for measured variables has a factor structure. This Paper compares estimation...

This paper addresses the issue of forecasting the term structure. We provide a unified state-space modelling framework that encompasses different existing discrete-time yield curve models. Within such framework we analyze the impact on forecasting performance of two crucial modelling choices,...

We analyse the panel of the Greenbook forecasts (sample 1970-96) and a large panel of monthly variables for the US (sample 1970-2003) and show that the bulk of dynamics of both the variables and their forecasts is explained by two shocks. Moreover, a two factor model which exploits, in real...

We introduce noisy information into a standard present value stock price model. Agents receive a noisy signal about the structural shock driving future dividend variations. The resulting equilibrium stock price includes a transitory component — the "noise bubble" — which can be responsible...

In a situation where agents can only observe a noisy signal of the shock to future economic fundamentals, SVAR models can still be successfully employed to estimate the shock and the associated impulse response functions. Identification is reached by means of dynamic rotations of the reduced...

We investigate identification issues in DSGE models and their consequences for parameter estimation and model evaluation when the objective function measures the distance between estimated and model-based impulse responses. Observational equivalence, partial and weak identification problems are...