The authors describe the principal results obtained from a new method applied to the estimation of potential U.S. GDP. This method derives from the work of Rennison (2002), which suggests that the joint use of extended multivariate filters and structural vector autoregression models is optimal for estimating potential output. The authors use this approach to estimate the two components of poten...

We document that the expectations of households, firms, and professional forecasters in standard surveys simultaneously extrapolate from recent events underreact to new information. Existing models expectation formation, whether behavioral or rational, cannot account for these observations. develop a rational theory extrapolation based on limited attention, which is consistent with this evidenc...

We analyze the ups and downs in economic growth recent decades by constructing a model with recurrent bubbles, crashes, endogenous growth. Once realized, bubbles crowd investment stimulate growth, but expectation about future crowds out reduces identify bubbly episodes estimating using US data. Counterfactual simulations suggest that IT housing not only caused booms also lifted GDP almost 2 per...

This paper investigates the interrelationship between urbanization, structural transformation, and post-2000 Chinese housing boom through lens of a dynamic spatial equilibrium model that features migration rich market structure with mortgages. Urbanization transformation emerge as key drivers China's house price boom, while at same time rising prices impede these forces economic transition. Pol...

Increases in the minimum wage can substantially reduce earnings inequality. To demonstrate this, we combine administrative and survey data with an equilibrium model of Brazilian labor market. We find that a 128 percent increase real Brazil between 1996 2018 had far-reaching spillover effects on wages higher up distribution. The increased accounts for 45 large fall inequality over this period. A...

We study the importance of input-output (IO) linkages and sectoral productivity (TFP) in determining cross-country income differences. find that while highly connected sectors are more productive than typical sector poor countries, opposite is true rich ones. To assess quantitative role TFP differences differences, we decompose variation using a multisector general equilibrium model. IO substan...

Motivated by the effects of COVID-19 pandemic, we present a theory Keynesian supply shocks: shocks that reduce potential output in sector economy, but that, reducing demand other sectors, ultimately push aggregate activity below potential. A shock is more likely when elasticity substitution between sectors relatively low, intertemporal high, and markets are incomplete. Fiscal policy can display...

This paper combines a data-rich environment with machine learning algorithm to provide new estimates of time-varying systematic expectational errors (“belief distortions”) embedded in survey responses. We find sizable distortions even for professional forecasters, all respondent-types overweighting the implicit judgmental component their forecasts relative what can be learned from publicly avai...

We analyze the following questions under imperfect labour markets. How does strategic outsourcing influence wage formation, profit sharing and employee effort when firms commit to optimal profit sharing before wage formation or decide for profit sharing after wage formation? What is the relationship between outsourcing, profit sharing, and equilibrium unemployment? We find that in both scenario...

In this paper, we seek to re-establish the link between the CES production function and neoclassical growth theory. We did so in three dimensions. First, we reviewed the increasing importance of the CES technology in modern dynamic macroeconomics, in expanding not only theory but also in addressing important policy questions. Second, we argued that the importance of the CES function in growth t...