This paper provides clear cut evidence that the slope and curvature factors of the yield curve contain more information about future changes in economic activity than the term spread alone, often used in practice as an indicator of future economic conditions. These two factors constitute independent sources of information about future economic activity, which are o¤set to each other in term spr...

We study what happens to identified shocks and dynamic responses when the data generating process features q disturbances but 1 < variables are used in an empirical model. Identified linear combinations of current past values all structural do not necessarily combine same type. Theory-based restrictions may be insufficient obtain dynamics. revisit evidence regarding transmission house price ...

This paper studies the role of differences in patterns production and international trade on business cycle volatility emerging developed economies. We study a multisector small open economy which firms produce commodities manufactures. estimate model to match key cross-sectional time-series across countries. Emerging economies run surpluses deficits manufactures, while sectoral flows are balan...

Business credit lags GDP growth by about one year. This contributes to high leverage during recessions and slow deleveraging. We show that a model in which firms use risky long-term debt replicates this adjustment of firm debt. In the model, slow-moving has important effects for real activity. High levels issued expansions are only gradually reduced recessions. generates an adverse feedback loo...

This paper estimates the effects of exogenous changes in income and consumption taxes. The tax shocks are proxied with a narrative account liability United Kingdom. Income cuts have large on GDP, private consumption, investment. modest not statistically significant GDP its components. Shifting burden taxation from to is expansionary. Consistent conventional public finance theories, these result...

This paper analyzes the effects of lower bound for interest rates on distributions inflation and rates. In a New Keynesian model with bound, two equilibria emerge: policy is mostly unconstrained in “target equilibrium,” whereas constrained “liquidity trap equilibrium.” Using options data inflation, we find forecast densities consistent target equilibrium no evidence favor liquidity equilibrium....

Analyzing International Monetary Fund (IMF) data, we find that overly optimistic growth expectations for a country induce economic contractions few years later. To isolate the causal effect, take an instrumental variable approach—exploiting randomness in allocation of IMF mission chiefs. We first document chiefs differ their individual degrees forecast optimism, yielding quasi-experimental vari...

We model the world economy as one system of endogenous input-output relationships subject to frictions and study how world’s structure GDP change due changes in frictions. derive a sufficient statistic identify from observed matrix, which we fully match for year 2011. show internal impact whole that they have much larger effect on than external also use our approach role during Great Recession ...

We estimate a behavioral New Keynesian (NK) model in which households and firms plan over finite horizon. The finite-horizon planning (FHP) outperforms rational expectations versions of the NK as well other models. In FHP model, are forward-looking thinking about events their horizon but backward-looking regarding beyond that point. This gives rise to substantial aggregate persistence without r...