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Author:Christiano, Lawrence J. 

Working Paper
Expectations, traps and discretion

We argue that discretionary monetary policy exposes the economy to welfare-decreasing instability. It does so by creating the potential for private expectations about the response of monetary policy to exogenous shocks to be self-fulfilling. Among the many equilibria that are possible, some have good welfare properties. But, others exhibit welfare decreasing volatility in output and employment. We refer to the latter type of equilibria as expectation traps. In effect, our paper presents a new argument for commitment in monetary policy because commitment eliminates these bad equilibria. ...
Working Papers in Applied Economic Theory , Paper 96-04

Working Paper
Temporal aggregation bias and government policy evaluation

Working Papers , Paper 302

Working Paper
Maximum likelihood in the frequency domain: a time to build example

A well known result is that the Gaussian log-likelihood can be expressed as the sum over different frequency components. This implies that the likelihood ratio statistic has a similar linear decomposition. We exploit these observations to devise diagnostic methods that are useful for interpreting maximum likelihood ratio tests. We apply the methods to the estimation and testing of two real business cycle models. The standard real business cycle model is rejected in favor of an alternative in which capital investment requires a planning period.
Working Paper Series , Paper WP-99-4

Conference Paper
Inside money, outside money and short-term interest rates

Proceedings

Working Paper
Assessing structural VARs

This paper analyzes the quality of VAR-based procedures for estimating the response of the economy to a shock. We focus on two key issues. First, do VAR-based confidence intervals accurately reflect the actual degree of sampling uncertainty associated with impulse response functions? Second, what is the size of bias relative to confidence intervals, and how do coverage rates of confidence intervals compare with their nominal size? We address these questions using data generated from a series of estimated dynamic, stochastic general equilibrium models. We organize most of our analysis around a ...
International Finance Discussion Papers , Paper 866

Working Paper
Temporal aggregation and the stock adjustment model of inventories

Working Papers , Paper 357

Working Paper
Unit roots in real GNP: do we know, and do we care?

Working Paper Series, Macroeconomic Issues , Paper 90-2

Working Paper
Asset pricing lessons for modeling business cycles

We develop a model which accounts for the observed equity premium and average risk-free rate, without implying counterfactually high risk aversion. The model also does well in accounting for business-cycle phenomena. With respect to the conventional measures of business-cycle volatility and comovement with output, the model does roughly as well as the standard business-cycle model. On two other dimensions, the model?s business-cycle implications are actually improved. Its enhanced internal propagation allows it to account for the fact that there is positive persistence in output growth, and ...
Working Papers , Paper 560

Working Paper
A continuous time, general equilibrium, inventory-sales model

Working Papers , Paper 361

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