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Working Paper
Risk sharing of disaggregate macroeconomic and idiosyncratic shocks
Comparing the degree to which idiosyncratic and disaggregate macro shocks (such as regional and industry shocks) are not shared in the economy provides greater understanding of why the economy lacks risk-sharing arrangements in specific areas and can suggest areas where the economy?s risk-sharing capability could be enhanced. The authors find that a negligible amount of risk (around 10 percent) is shared in the aggregate, about 50 percent is shared within regions and industries, while the remaining 40 percent is not shared with other households. These findings suggest that given the low level ...
Working Paper
An investigation into the magnitude of foreign conflicts
Journal Article
The long-run costs of moderate inflation
Long-run price stability is generally considered to be a primary goal of monetary policymakers in many countries. One reason policymakers care about inflation is that it can harm economic performance. Numerous studies of the impact of inflation on economic performance have focused on whether increases in inflation reduce economic growth in the long run These studies have found that prolonged high inflation does in fact reduce economic growth, but they were not able to detect a significant long-run relationship between real growth and low or moderate inflation. Because anti-inflationary ...
Working Paper
Some intranational evidence on output-inflation tradeoffs
In a seminal paper, Lucas (1973) provided the theoretical relationship between aggregate demand and real output based on relative price confusion at the individual market level. Ball, Mankiw, and Romer (BMR, 1988) derive the same relation using a New Keynesian framework. Even though both theories predict a positive relationship between nominal shocks and cyclical movements in real output, they are distinguished by two notable differences. First, according to New Keynesian theory, nominal shocks have a smaller effect on real output for high inflation countries since prices are adjusted more ...
Working Paper
Is the political business cycle for real?
This paper's macroeconomic model combines features from both real and political business cycle models. It augments a standard real business cycle tax model by allowing for varying levels of government partisanship and competence in order to replicate two important empirical regularities: First, that on average the economy expands early under Democratic presidents and contracts early under Republican presidents. Second, that presidents whose parties successfully retain the presidency have stronger-than-average growth in the second half of their terms. The model generates both of these features ...
Working Paper
Measuring business cycle features
Since the extensive work by Burns and Mitchell (1947), many economists have interpreted economic fluctuations in terms of business cycle phases. Given this, we argue that in addition to usual model selection criteria currently used in the profession, the adequacy of a univariate macroeconomic time series model should be based on its ability to replicate two most important business cycle features of the U.S. data--duration and amplitude. We propose a number of checks for whether univariate statistical models generate business cycle features observed in US GDP and find that many popular ...
