This paper examines the choice of monetary policy in response to seasonal fluctuations in the economy. It discusses the costs and benefits of smoothing interest rates over the seasons, which has been the Fed's policy since its founding in 1914, and presents simulations suggesting how the economy...

This paper examines the interaction between consumer durable goods and consumer non-durable goods in determining the responsiveness of total expenditure to the after-tax real interest rate. The introduction of consumer durables into the consumer's decision problem can have important effects on...

This paper examines the optimal allocation of risk in an overlapping-generations economy. It compares the allocation of risk the economy reaches naturally to the allocation that would be reached if generations behind a Rawlsian 'veil of ignorance' could share risk with one another through...

Analyzing 50 years of inflation expectations data from several sources, we document substantial disagreement among both consumers and professional economists about expected future inflation. Moreover, this disagreement shows substantial variation through time, moving with inflation, the absolute...

This paper is a contribution to the analysis of optimal monetary policy. It begins with a critical assessment of the existing literature, arguing that most work is based on implausible models of inflation-output dynamics. It then suggests that this problem may be solved with some recent...

This paper addresses the issue of how to give optimal advice about monetary policy when it is known that the advice may not be heeded. We examine a simple macroeconomic model in which monetary policy has the ability to stabilize output by offsetting exogenous shocks to aggregate demand. The...

This paper assumes that a central bank commits itself to maintaining an inflation target and then asks what measure of the inflation rate the central bank should use if it wants to maximize economic stability. The paper first formalizes this problem and examines its microeconomic foundations. It...

This paper reviews the political uproar over offshore outsourcing connected with the release of the Economic Report of the President (ERP) in February 2004, examines the differing ways in which economists and non-economists talk about offshore outsourcing, and assesses the empirical evidence on...

This paper presents a non-technical discussion of some of the important developments in macroeconomics over the past twenty years. It considers three broad categories of research. First, it discusses how the notion of rational expectations has affected economists' views on the role of economic...

This paper presents and implements statistical tests of stock market forecastability and volatility that are immune from the severe statistical problems of earlier tests. Although the null hypothesis of strict market efficiency is rejected, the evidence against the hypothesis is not...