This paper shows the success of valuation risk-time-preference shocks in Epstein-Zin utility-in resolving asset pricing puzzles rests sensitively on the way it is introduced. The specification used in the literature is at odds with several desirable properties of recursive preferences because...

Recent proposals to reduce U.S. debt reveal large differences in their implied targets. These differences demonstrate the uncertainty surrounding future tax rates and long-run debt targets. We use a standard real business cycle model in which a Bayesian household learns about the state-dependent...

When monetary policy faces a zero lower bound (ZLB) constraint on the nominal interest rate, determinacy is not guaranteed even if the Taylor principle is satisfied when the ZLB does not bind. This paper shows the boundary of the determinacy region imposes a clear tradeoff between the expected...

This article presents global solutions to standard New Keynesian models with a zero lower bound (ZLB) constraint on the nominal interest rate. Rather than focus on specific sequences of shocks, we provide the solution for all combinations of technology and discount factor shocks and a thorough...

When monetary policy faces a zero lower bound (ZLB) constraint on the nominal interest rate, a minimum state variable (MSV) solution may not exist even if the Taylor principle holds when the ZLB does not bind. This paper shows there is a clear tradeoff between the expected frequency and average...

This paper studies the empirical and theoretical link between increases in income inequality and increases in current account deficits. Cross-sectional econometric evidence shows that higher top income shares, and also financial liberalization, which is a common policy response to increases in...

This paper studies the empirical and theoretical link between increases in income inequality and increases in current account deficits. Cross-sectional econometric evidence shows that higher top income shares, and also financial liberalization, which is a common policy response to increases in...

Uncertainty about the economy increased when the Fed reduced the federal funds rate to its effective lower bound because the constraint restricted the Fed's ability to stabilize the economy. As a result, a much stronger negative relationship between uncertainty and economic activity emerged...

Establishment entry and exit is strongly correlated with output and unemployment. This paper examines how these linkages affect business cycle dynamics through the lens of a search and matching model augmented to include multi-worker establishments that endogenously enter and exit. Analytical...