This paper re-considers the empirical relevance of the Lucas critique using a sticky price model in which a weak central bank response to inflation generates equilibrium indeterminacy. The model is calibrated on the magnitude of the historical shift in the Fed's policy rule and is capable of...

Was the Great Moderation in the United States due to good policy or good luck? Taking, as data generation process, a New Keynesian sticky-price model in which the only source of change is the move from a passive to an active monetary rule, we show how standard econometric methods, both...

We develop a dynamic general equilibrium model where workers can engage in search while on the job. We show that on-the-job search is a key component in explaining labor market dynamics in models of equilibrium unemployment. The model predicts fluctuations of unemployment, vacancies, and labor...