The Great Recession, and the fiscal response to it, has revived interest in the size of fiscal multipliers. Standard business cycle models have difficulties generating multipliers greater than one. And they also cannot produce any significant state-dependence in the size of the multipliers over...

An influential paper by Clarida, Galí, and Gertler (2000) has attributed the great inflation of the 1970s to the violation of the Taylor principle in the conduct of U.S. monetary policy (weak, indeterminacy inducing response to expected inflation). We evaluate this thesis in the context of a...

We revisit the contribution of misperceived money to business cycles and, in particular, to the inertial dynamics of inflation following a monetary policy shock. We establish three things. First, the difference between preliminary and revised money data captures monetary misperceptions well....

The two leading explanations for the poor inflation performance during the 1970s are policy opportunism (Barro and Gordon 1983) and "inadvertently" bad monetary policy (Clarida, Gali, and Gertler 2000, Orphanides 2003). The main models of the latter category are that of Orphanides (loose...

This paper explores the implications of a new theory of price determination (due to Leeper, Woodford and Sims) for the maintenance of various exchange rate systems – crawling pegs, fixed pegs, and common currency areas. It shows that deeper monetary integration requires more fiscal discipline,...