We estimate a forward-looking monetary policy reaction function for the postwar United States economy, before and after Volcker's appointment as Fed Chairman in 1979. Our results point to substantial differences in the estimated rule across periods. In particular, interest rate policy in the...

In this Paper we present a simple, theory-based measure of the variations in aggregate economic efficiency associated with business fluctuations. We decompose this indicator, which we refer to as ‘the gap’, into two constituent parts: a price markup and a wage markup, and show that the...

The present paper describes recent research on two central themes of Keynes’ General Theory: (i) the social waste associated with recessions, and (ii) the effectiveness of fiscal policy as a stabilization tool. The paper also discusses some evidence on the extent to which fiscal policy has...

Our answer: Not so well. We reached that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the...

This Paper suggests that skill accumulation through past work experience, or ‘learning-by-doing’ (LBD), can provide an important propagation mechanism in a dynamic stochastic general equilibrium model, as the current labour supply affects future productivity. Our econometric analysis uses a...

Economic decisions such as occupational and entrepreneurial choices may violate true comparative advantage when economic agents are uncertain about which activity best matches their talents. If relative performance varies over the business cycle (for instance, if downturns affect...

We provide a comprehensive empirical characterization of the linkages between key macroeconomic and financial variables around business and financial cycles for 21 OECD countries over the period 1960–2007. In particular, we analyze the implications of 122 recessions, 112 (28) credit...

This Paper reviews recent econometric work on factor models in large cross-sections of time series. In this literature, traditional factor analysis is adapted to develop parsimonious estimation methods for high dimension time series models. The review covers problems of consistency and rates –...

This Paper analyses the welfare effects of monetary policy rules in a quantitative business cycle model of a two-country world. The model features staggered price setting, and shocks to productivity and to the uncovered interest rate parity (UIP) condition. UIP shocks have a sizable negative...