Caught between the end of the National Banking Era and the beginning of the Federal Reserve System, the crisis of 1914 provides an example of a banking panic avoided. We investigate how this outcome was achieved by examining data on the issues of Aldrich-Vreeland emergency currency and clearing...

Labor income has been declining as a share of total income earned in the United States for the past three decades. We look at the past effect of the labor share decline on income inequality, and we study the likely future path of the labor share and its implications for inequality.

Investment in structures is still 29 percent below its pre-recession peak. Using a new indicator of the level of structures that would be warranted by economic conditions, we find evidence that the level of investment was too high in the first half of the 2000s. This overinvestment created an...

Policy function iteration methods for solving and analyzing dynamic stochastic general equilibrium models are powerful from a theoretical and computational perspective. Despite obvious theoretical appeal, significant startup costs and a reliance on grid-based methods have limited the use of...

This paper develops a dynamic asset pricing model with persistent heterogeneous beliefs. The model features competitive traders who receive idiosyncratic signals about an underlying fundamentals process. We adapt Futia’s (1981) frequency domain methods to derive conditions on the fundamentals...

We provide an explicit aggregation in the neoclassical growth model with aggregate shocks and uninsurable employment risk. We show there are two restrictions on the unemployment shock for approximate aggregation to occur. First the probability of unemployment must be positive for each agent in...

We demonstrate that shortfall-minimizing portfolio selection based on the Cressie- Read family of divergence measures maps to the HARA family. This means that all HARA utility functions can be interpreted as “endogenous” in the sense described in Stutzer (2003), and that traditional HARA...

Fiscal foresight---the phenomenon that legislative and implementation lags ensure that private agents receive clear signals about the tax rates they face in the future---is intrinsic to the tax policy process. This paper develops an analytical framework to study the econometric implications of...

We use a rational expectations framework to assess the implications of rising debt in an environment with an unknown ‘fiscal limit.’ The fiscal limit is defined as the point where the government no longer has the ability to further expand its existing debt stock, so either fiscal or monetary...

How do information flows influence business cycle dynamics in models with anticipated (news shocks) and unanticipated innovations? To address this question, we show how alternative specifications of news affect the equilibrium by deriving the mapping between news shocks and the endogenous...