#2007-025B "Monetary Policy and Natural Disasters in a DSGE Model: How Should the Fed Have Responded to Hurricane Katrina?"
by Benjamin D. Keen, and Michael R. Pakko
June 2007
Revised August 2008

In the immediate aftermath of Hurricane Katrina, speculation arose that the Federal Reserve might respond by easing monetary policy. More...

#2006-035C "Inflation Risk and Optimal Monetary Policy"
by William T. Gavin, Benjamin D. Keen, and Michael R. Pakko
May 2006
Revised December 2007

This paper shows that the optimal monetary policies recommended by New Keynesian models still imply a large amount of inflation risk. More...

FORTHCOMING: Macroeconomic Dynamics

#2005-054C "No Smoking at the Slot Machines: The Effect of a Smoke-Free Law on Delaware Gaming Revenues"
by Michael R. Pakko
June 2005
Revised December 2005

As communities around the nation consider laws restricting smoking in public places, a key political and economic issue that often arises is the effect that such laws have on the sales and profits of particular sectors. The gaming industry has been active in opposition to such ordinances, citing large prospective losses. This article analyzes the revenues of three gaming facilities in Delaware following the implementation of a smoke-free law in December 2002. More...

PUBLISHED: Applied Economics, July 2008, 40(14), pp. 1769-74

#2005-028B "Smoke-free Law Did Affect Revenue From Gaming in Delaware"
by Michael R. Pakko
May 2005
Revised June 2005

A paper recently published in the journal Tobacco Control purports to show that the implementation of a smoking prohibition in Delaware had no statistically significant effect on the revenues of three gaming facilities in that state. After undertaking a thorough analysis of the data, I find that the smoke-free law did affect revenues from gaming in Delaware. More...

PUBLISHED: Tobacco Control, February 2006, 15(1), pp. 68-9

#2004-026B "The Monetary Instrument Matters"
by William T. Gavin, Benjamin D. Keen, and Michael R. Pakko
November 2004
Revised March 2005

This paper revisits the issue of money growth versus the interest rate as the instrument of monetary policy. Using a dynamic stochastic general equilibrium framework, we examine the effects of alternative monetary policy rules on inflation persistence, the information content of monetary data, and real variables. More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, September/October 2005, 87(5), pp. 633-58

#2004-017D "Monetary Policy, Taxes, and the Business Cycle"
by William T. Gavin, Finn E. Kydland, and Michael R. Pakko
August 2004
Revised May 2006

This paper analyzes the interaction of inflation with the tax code and its contribution to aggregate fluctuations. We find significant effects operating through the tax on realized nominal capital gains. More...

PUBLISHED: Journal of Monetary Economics, September 2007, 54(6), pp. 1587-1611

#2003-023B "A Spectral Analysis of the Cross-Country Consumption Correlation Puzzle"
by Michael R. Pakko
August 2003
Revised April 2004

Dynamic general equilibrium models predict high cross-country consumption correlations, whereas the data show that output correlations tend to be higher. Spectral decomposition reveals that this ranking varies across frequency bands, with consumption correlations often exceeding output correlations at higher frequencies. More...

PUBLISHED: Economics Letters, September 2004, 84(3), pp. 341-347

#2003-016A "On The Information Content of Asymmetric FOMC Policy Statements: Evidence From A Taylor-Rule Perspective"
by Michael R. Pakko
June 2003

Over the past two decades, the FOMC has included in its policy decisions a statement of bias toward subsequent tightening or easing of policy. This paper examines the predictive content of these statements in a Taylor-rule setting, finding that they convey information that is useful for forecasting changes in the federal funds rate target, even after controlling for policy responses to inflation and the output gap. More...

PUBLISHED: Economic Inquiry, July 2005, 43(3), pp. 558-69

#2002-030B "Substitution Elasticities and Investment Dynamics in Two Country Business Cycle Models"
by Michael R. Pakko
November 2002
Revised November 2003

Two country applications of equilibrium business cycle methodology have succeeded in matching some key features of international fluctuations. However, discrepancies between theory and data remain. More...

PUBLISHED: Topics in Macroeconomics, 2003, 3(1), pp. Article 14

#2001-020A "What Happens When the Technology Growth Trend Changes?: Transition Dynamics, Capital Growth and the "New Economy""
by Michael R. Pakko
October 2001

The rapid increase in U.S. economic growth during the late 1990s inspired speculation that an acceleration in the rate of technological progress had given rise to an increase in potential output growth. This paper considers the transition dynamics associated with such a change using a general equilibrium framework that incorporates stochastic growth trends. More...

PUBLISHED: Review of Economic Dynamics, April 2002, 5(2), pp. 376-407