For more than three decades, macroeconomics has gone backwards. The treatment of identification now is no more credible than in the early 1970s but escapes challenge because it is so much more opaque. Macroeconomic theorists dismiss mere facts by feigning an obtuse ignorance about such simple assertions as "tight monetary policy can cause a recession." Their models attribute fluctuations in agg...

Ragnar Frisch proposed in 1936 a procedure for estimating natural variable values by modifying what are now called structural macroeconometric models. This paper shows that Frisch’s procedure can be used to illuminate natural concepts using today’s models. The procedure also forces one to be precise regarding the assumptions used in moving from a short-run model to a medium-run or long-run model.

Three of the papers examine the relationship between financial asset valuations and macroeconomic fundamentals. Hall tries to account for corporate equity valuations using fundamentals such as taxes, risk, and depreciation with mixed results. Bernanke and Kuttner also examine the fundamental determinants of equity prices, but they focus only on monetary policy surprises, which appear to have a ...

Consumption is the largest expenditure component in the US economy, accounting for between 60-70 percent of total GDP. In this set of notes we study consumption decisions. In micro you probably studied how people choose consumption among different goods in the cross-section: for example, how many apples and oranges to consume. In macro we study consumption in the time series dimension: how much...