The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of real primary surpluses. Monetary policy remains important. The central bank can set an interest rate target, which determines the path of expected inflation, while news about the...

Macro-finance addresses the link between asset prices and economic fluctuations. Many models reflect the same rough idea: the market's ability to bear risk varies over time, larger in good times, and less in bad times. Models achieve this similar result by quite different mechanisms, and I...

I analyze monetary policy with interest on reserves and a large balance sheet. I show that conventional theories do not determine inflation in this regime, so I base the analysis on the fiscal theory of the price level. I find that monetary policy can peg the nominal rate, and determine expected...

In standard solutions, the new-Keynesian model produces a deep recession with deflation in a liquidity trap. The model also makes unusual policy predictions: Useless government spending, technical regress, and capital destruction have large multipliers. These predictions become larger as prices...

I address the controversy over whether the financial services industry is "too big." We should be asking whether the finance industry is functioning properly instead. The facts suggest that demand for financial services increased, perhaps temporarily, rather than suggesting a changing distortion...

Mean-variance portfolio theory can apply to the streams of payoffs such as dividends following an initial investment, in place of one-period returns. This description is especially useful when returns are not independent over time and investors have non-marketed income. Investors hedge their...

I translate familiar concepts of discrete-time time-series to contnuous-time equivalent. I cover lag operators, ARMA models, the relation between levels and differences, integration and cointegration, and the Hansen-Sargent prediction formulas

Discount rate variation is the central organizing question of current asset pricing research. I survey facts, theories and applications. We thought returns were uncorrelated over time, so variation in price-dividend ratios was due to variation in expected cashflows. Now it seems all...

Bennett McCallum (2009), applying Evans and Honkapohja's (2001) results, argues that "learnability" can save New-Keynesian models from their indeterminacies. He claims the unique bounded equilibrium is learnable, and the explosive equilibria are not. However, he assumes that agents can directly...

To question the statistical significance of return predictability, we cannot specify a null that simply turns off that predictability, leaving dividend growth predictability at its essentially zero sample value. If neither returns nor dividend growth are predictable, then the dividend-price...