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Journal Article
Jargon alert : Rational expectations
Journal Article
How Have Changing Sectoral Trends Affected GDP Growth?
Trend GDP growth has slowed about 2.3 percentage points to 1.7% since 1950. Different economic sectors have contributed to this slowing to varying degrees depending on the distinct trends of technology and labor growth in each sector. The extent to which sectors influence overall growth depends on the degree of spillovers to other sectors, which amplifies the effect of sectoral changes. Three sectors with slowing growth and linkages to other sectors?construction, nondurable goods, and professional and business services?account for 60% of the decline in trend GDP growth.
Journal Article
Characterizing the 2014–16 Slowdown in Investment
Investment growth slowed from 2014 to 2016, a period when the overall economy was expanding. Using a statistical model, the author found a clear evidence that investment growth fluctuates between high and low growth regimes that usually correspond to expansions and recessions. However, during 2014?16, the investment sector experienced an isolated recession within an overall expansion, which is unusual by historical standards.
Working Paper
Uncertainty and fiscal cliffs
Motivated by the US Fiscal Cliff in 2012, this paper considers the short- and longer- term impact of uncertainty generated by fiscal policy. Empirical evidence shows increases in economic policy uncertainty lower investment and employment. Investment that is longer-lived and subject to a longer planning horizon responds to policy uncertainty with a lag, while capital that depreciates more quickly and can be installed with few costs falls immediately. A DSGE model incorporating uncertainty over future tax regimes produces responses to fiscal uncertainty that match key features of the data. The ...
Working Paper
Optimal monetary policy regime switches
Given regime switches in the economy?s growth rate, optimal monetary policy rules may respond by switching policy parameters. These optimized parameters differ across regimes and from the optimal choice under fixed regimes, particularly in the inflation target and interest rate inertia. Optimal switching rules produce welfare gains relative to constant rules, with switches in the implicit real interest rate used for policy and the degree of interest rate inertia producing the largest gains. However, gains from switching rules decrease if the monetary authority trades-off the probability of ...
Working Paper
Search with wage posting under sticky prices
Journal Article
Consumption Growth Regimes and the Post-Financial Crisis Recovery
Andrew Foerster and Jason Choi find that consumption has grown more slowly after the Great Recession due to the continued influence of persistent factors unusual to see outside recessions.
Working Paper
Sectoral vs. aggregate shocks : a structural factor analysis of industrial production
This paper uses factor analytic methods to decompose industrial production (IP) into components arising from aggregate shocks and idiosyncratic sector-specific shocks. An approximate factor model finds that nearly all (90%) of the variability of quarterly growth rates in IP are associated with common factors. Because common factors may reflect sectoral shocks that have propagated by way of input-output linkages, we then use a multisector growth model to adjust for the effects of these linkages. In particular, we show that neoclassical multisector models, of the type first introduced by Long ...