Working Paper
Expectations, traps and discretion
Chari, V. V.; Christiano, Lawrence J.; Eichenbaum, Martin S. (1996)
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
Assessing the effects of fiscal shocks
Fisher, Jonas D. M.; Burnside, Craig; Eichenbaum, Martin S. (1999)
This paper investigates the response of real wages and hours worked to an exogenous shock in fiscal policy. We identify this shock with the dynamic response of government purchases and tax rates to an exogenous increase in military purchases. The fiscal shocks that we isolate are characterized by highly correlated increases in government purchases, tax rates and hours worked as well as persistent declines in real wages. We assess the ability of standard Real business Cycle models to account for these facts. They can-but only under the assumption that marginal income tax rates are constant, a ...
Working Paper Series , Paper WP-99-18

Conference Paper
Inside money, outside money and short-term interest rates
Chari, V. V.; Christiano, Lawrence J.; Eichenbaum, Martin S. (1994)
Proceedings

Working Paper
Assessing structural VARs
Vigfusson, Robert J.; Christiano, Lawrence J.; Eichenbaum, Martin S. (2006)
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
Christiano, Lawrence J.; Eichenbaum, Martin S. (1987)
Working Papers , Paper 357

Working Paper
Unit roots in real GNP: do we know, and do we care?
Christiano, Lawrence J.; Eichenbaum, Martin S. (1990)
Working Paper Series, Macroeconomic Issues , Paper 90-2

Journal Article
Testing the Calvo model of sticky prices
Fisher, Jonas D. M.; Eichenbaum, Martin S. (2003-04)
This article discusses the empirical performance of a widely used model of nominal rigidities: the Calvo model of sticky good prices. The authors argue that there is overwhelming evidence against this model. But this evidence is generated under three key assumptions: one, there is no lag between the time firms reoptimize their price plans and the time they implement those plans; two, there is no measurement error in inflation; and three, monetary policy is the same in the pre-1979 and post-1982 periods. The authors discuss the impact of relaxing each of these assumptions.
Economic Perspectives , Volume 27 , Issue Q II , Pages 40-53

Working Paper
A continuous time, general equilibrium, inventory-sales model
Christiano, Lawrence J.; Eichenbaum, Martin S. (1985)
Working Papers , Paper 361

Working Paper
Fiscal shocks in an efficiency wage model
Fisher, Jonas D. M.; Burnside, Craig; Eichenbaum, Martin S. (1999)
This paper illustrates a particular limited information strategy for assessing the empirical plausibility of alternative quantitative general equilibrium business cycle models. The basic strategy is to test whether a model economy can account for the response of actual economy to an exogenous shock. Here we concentrate on the response of aggregate hours worked and real wages to a fiscal policy shock. The fiscal policy shock is identified with the dynamic response of government purchases and averages marginal income tax rates to an exogenous increase in military purchases. Burnside, Eichenbaum ...
Working Paper Series , Paper WP-99-19

Working Paper
The response of hours to a technology shock: evidence based on direct measures of technology
Vigfusson, Robert J.; Christiano, Lawrence J.; Eichenbaum, Martin S. (2003)
We investigate what happens to hours worked after a positive shock to technology, using the aggregate technology series computed in Basu, Fernald and Kimball (1999). We conclude that hours worked rise after such a shock.
International Finance Discussion Papers , Paper 790