Whether prices are pro- or counter-cyclical represents a major difference in the predictions of models that focus on aggregate demand shocks as the primary source of business cycle fluctuations, versus those that emphasize shocks to aggregate supply. Earlier studies have interpreted their...

Over the past twenty years, output growth in the U.S. has become noticeably less volatile. During that time, the economy has experienced two recessions, compared with four in each of the two preceding twenty year periods. Further, the loss in output during the last two recessions has been...

This Economic Letter summarizes the papers presented at the conference "Nominal Rigidities" held in San Francisco on June 16 under the joint sponsorship of the Federal Reserve Bank of San Francisco, the National Bureau of Economic Research, and the Federal Reserve Bank of Cleveland.

A small vector autoregression model is estimated to assess how demand and supply shocks influence Australian output and price behavior. The model is identified by assuming that aggregate demand shocks have transitory effects on output, while aggregate supply shocks have permanent effects. The...

In this paper, we estimate a VAR model to present an empirical finding that an unexpected rise in the federal funds rate decreases the ratio of sales to stocks available for sales, while it increases finished goods inventories. In addition, dynamic responses of these variables reach their peaks...

We study the sources of the Great Moderation by estimating a variety of medium-scale DSGE models that incorporate regime switches in shock variances and in the inflation target. The best-fit model, the one with two regimes in shock variances, gives quantitatively different dynamics in comparison...

We present an algorithm and software routines for computing nth order Taylor series approximate solutions to dynamic, discrete-time rational expectations models around a nonstochastic steady state. The primary advantage of higher-order (as opposed to first- or second-order) approximations is...

Consumption-habits have become an integral component in new Keynesian models. However, consumption-habits can be modeled in a host of different ways and this diversity is reflected in the literature. I examine whether different approaches to modeling consumption habits have important...