This paper studies the possibility of using the broad monetary aggregate M2 to target the quarterly rate of growth of nominal GDP. Our findings indicate that the Federal Reserve could probably guide M2 in a way that reduces not only the long-term average rate of inflation but also the variance...

This paper examines the problem of measuring the growth of a monetary aggregate in the presence of innovations in financial markets and changes in the relationship between individual assets and output. We propose constructing a monetary aggregate so that it is a good leading indicator of nominal...

Traditional least squares estimates of the responsiveness of gasoline consumption to changes in gasoline prices are biased toward zero, given the endogeneity of gasoline prices. A seemingly natural solution to this problem is to instrument for gasoline prices using gasoline taxes, but this...

Dating business cycles entails ascertaining economy-wide turning points. Broadly speaking, there are two approaches in the literature. The first approach, which dates to Burns and Mitchell (1946), is to identify turning points individually in a large number of series, then to look for a common...

This paper examines old and new evidence on the predictive performance of asset prices for inflation and real output growth. We first review the large literature on this topic, focusing on the past dozen years. We then undertake an empirical analysis of quarterly data on up to 38 candidate...

The volatility of economic activity in most G7 economies has moderated over the past forty years. Also, despite large increases in trade and openness, G7 business cycles have not become more synchronized. After documenting these twin facts, we interpret G7 output data using a structural VAR that...

This paper examines monetary policy in Rudebusch and Svensson's (1999) two equation macroeconomic model when the policymaker recognizes that the model is an approximation and is uncertain about the quality of that approximation. It is argued that the minimax approach of robust control provides a...

The possibility of mean reversion in stock prices recently has been examined using statistics based on multi-year returns. Previous researchers have noted difficulties in drawing inferences about these statistics because of poor performance of the usual approximating asymptotic distributions. We...

This paper examines the empirical relationship in the postwar United States between the aggregate business cycle and various aspects of the macroeconomy, such as production, interest rates, prices, productivity, sectoral employment, investment, income, and consumption. This is done by examining...

Quah's [1993a] transition matrix analysis of world income distribution based on annual data suggests an ergodic distribution with twin peaks at the rich and poor end of the distribution. Since the ergodic distribution is a highly non-linear function of the underlying transition matrix estimated...