#2008-021A "Institutional Causes of Macroeconomic Volatility"
by Levon Barseghyan, and Riccardo DiCecio
June 2008

In this paper we investigate the relation between the quality of institutions and macroeconomic volatility. Using instrumental variable regressions, we show that higher barriers to entry lead to higher volatility. More...

#2008-019A "Oil Crisis, Energy-Saving Technological Change and the Stock Market Crash of 1973-74"
by Sami Alpanda, and Adrian Peralta-Alva
June 2008

The market value of U.S. corporations was nearly halved following the oil crisis of October 1973. Real energy prices more than doubled by the end of the decade, increasing energy costs and spurring innovation in energy-saving technologies by corporations. This paper uses a neo-classical growth model to quantify the impact of the increase in energy prices on the market value of U.S. corporations. More...

#2008-018A "Real Interest Rate Persistence: Evidence and Implications"
by Christopher J. Neely, and David E. Rapach
June 2008

The real interest rate plays a central role in many important financial and macroeconomic models, including the consumption-based asset pricing model, neoclassical growth model, and models of the monetary transmission mechanism. We selectively survey the empirical literature that examines the time-series properties of real interest rates. More...

#2008-017A "A Macroeconomic Analysis of Obesity"
by Pere Gomis-Porqueras, and Adrian Peralta-Alva
June 2008

This paper tries to understand the underlying causes of the rapid increase in obesity rates over recent decades. In particular, we propose a dynamic general equilibrium model to derive the quantitative implications of a decline in the relative (monetary and time) cost of food prepared away from home on the caloric intake of the average American adult over the last forty years. More...

#2008-015A "Optimal Monetary and Fiscal Policies in a Search Theoretic Model of Monetary Exchange"
by Pere Gomis-Porqueras, and Adrian Peralta-Alva
June 2008

In this paper we study optimal monetary and fiscal policies, and the welfare costs of inflation, within the Lagos and Wright (2005) framework. Monetary equilibria may be inefficient without fiscal policy tools due to bargaining frictions. We show that subsidies in decentralized markets can be implemented to alleviate underproduction, while money is still essential. More...

#2008-014B "Excessive Demand and Boom-Bust Cycles"
by Patrick A. Pintus, and Yi Wen
June 2008
Revised June 2008

It has long been argued in the history of economic thought that boom-bust business cycles may be driven by over-investment (Tugan-Baranovsky, 1894; and Wicksell, 1906). But how is it possible to sustain over-investment without excessive savings? More...

#2008-013A "Why Money Growth Determines Inflation in the Long Run: Answering the Woodford Critique"
by Edward Nelson
May 2008

Woodford (2007) argues that it is not appropriate to regard inflation in the steady state of New Keynesian models as determined by steady-state money growth. Woodford instead argues that the intercept term in the monetary authority’s interest-rate policy rule determines steady-state inflation. In this paper, I offer an alternative interpretation of steady-state behavior, according to which it is appropriate to regard steady-state inflation as determined by steady-state money growth. More...

#2008-012A "Inflation, Monetary Policy and Stock Market Conditions"
by Michael D. Bordo, Michael J. Dueker, and David C. Wheelock
May 2008

This paper examines the association between inflation, monetary policy and U.S. stock market conditions during the second half of the 20th century. More...

#2008-011A "Monetary Policy: Why Money Matters and Interest Rates Don’t"
by Daniel L. Thornton
May 2008

Monetary policy is now conducted by targeting a very short-term interest rate. The Fed and other central banks attempt to control the price level by manipulating aggregate demand by adjusting their interest rate target. More...

#2008-009A "Oil and the U.S. Macroeconomy: An Update and a Simple Forecasting Exercise"
by Kevin L. Kliesen
April 2008

Recently, some analysts and economists had warned that the U.S. economy faces a much higher risk of falling into a recession should the price of oil rise to one hundred dollars per barrel or more. More...