This paper explores a new approach to identifying government spending shocks which avoids many of the shortcomings of existing approaches. The new approach is to identify government spending shocks with statistical innovations to the accumulated excess returns of large US military contractors....

This article explores a new approach to identifying government spending shocks which avoids many of the shortcomings of existing approaches. The new approach is to identify government spending shocks with statistical innovations to the accumulated excess returns of large US military contractors....

This paper illustrates a particular limited information strategy for assessing the empirical plausibility of alternative quantitative general equilibrium business cycle models. The basic strategy is to test whether a model economy can account for the response of actual economy to an exogenous...

We introduce two modifications into the standard real business cycles model: habit persistence preferences and limitations on intersectoral mobility. The resulting model is consistent with the observed mean equity premium, mean risk free rate and Sharpe ration on equity. With respect to the...

We study the aggregate implications of (S,s) inventory policies in a dynamic general equilibrium model. Firms in the model's retail sector face idiosyncratic demand risk, and (S,s) inventory policies are optimal because of fixed order costs. The model economy replicates salient features of the...

This article studies the impact on aggregate economic activity of increases in defense purchases which are unrelated to other developments in the economy. The authors use empirical evidence to evaluate the predictions of several prominent models.

We study the behavior of output, employment, consumption, and investment in Germany during the Great Depression of 1928-37. In this time period, real wages were countercyclical, and productivity and fiscal policy were procyclical. We use the neoclassical growth model to investigate how much...

This paper investigates the response of real wages and hours worked to an exogenous shock in fiscal policy. We identify this shock with the dynamic response of government purchases and tax rates to an exogenous increase in military purchases. The fiscal shocks that we isolate are characterized...

There are significant differences in the dynamics of employment over the business cycle between young and old manufacturing plants. Young plants are more sensitive to aggregate disturbances, and they respond to them along different margins. We interpret these differences as reflecting greater...