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Briefing
Potential causes and implications of the rise in long-term unemployment
Hornstein, Andreas; Lubik, Thomas A.; Romero, Jessica Sackett (2011-09)
Long-term unemployment rose dramatically during the recent recession and remains elevated. A primary cause may be the fact that more workers with inherently low job finding rates have become unemployed. This would suggest that the natural rate of unemployment has increased, and that additional monetary stimulus may have only a limited effect on reducing unemployment.
Richmond Fed Economic Brief , Issue Sep

Working Paper
Indeterminacy and Imperfect Information
Matthes, Christian; Mertens, Elmar; Lubik, Thomas A. (2019-10-08)
We study equilibrium determination in an environment where two kinds of agents have different information sets: The fully informed agents know the structure of the model and observe histories of all exogenous and endogenous variables. The less informed agents observe only a strict subset of the full information set. All types of agents form expectations rationally, but agents with limited information need to solve a dynamic signal extraction problem to gather information about the variables they do not observe. We show that for parameter values that imply a unique equilibrium under full ...
Working Paper , Paper 19-17

Briefing
Analyzing Fiscal Policy Matters More Than Ever: The Fiscal Theory of the Price Level and Inflation
Lubik, Thomas A. (2022-09)
he fiscal theory of the price level is a theoretical framework for understanding how monetary and fiscal policies interact in the determination of macroeconomic outcomes. The key insight is that future fiscal conditions determine the current price level, whereby monetary and fiscal policy are connected by the government budget constraint.
Richmond Fed Economic Brief , Volume 22 , Issue 39

Journal Article
Exchange rate volatility in a simple model of firm entry and FDI
Russ, Katheryn N.; Lubik, Thomas A. (2012-01)
Recent discussions of exchange rate determination have emphasized the possible role of foreign direct investment in influencing exchange rate behavior. Yet, there are few existing models of multinational enterprises (MNEs) and endogenous exchange rates. This article demonstrates that the entry decisions of MNEs can influence the volatility of the real exchange rate in countries where there are significant costs involved in maintaining production facilities, even when prices are perfectly flexible. We develop an analytically tractable framework with closed-form solution, but show that the ...
Economic Quarterly , Volume 98 , Issue 1Q , Pages 51-76

Briefing
The Natural Beveridge Curve
Anderson, Katharine; Lubik, Thomas A. (2026-05-27)
The Beveridge curve is a central concept for analyzing the state of the economy and the labor market.We introduce the idea of a natural Beveridge curve, which abstracts from transitory movements and focuses on structural relationships.Analyzing the gap between the actual and natural Beveridge curves gives policymakers a better sense of how much stabilization policy in the labor market can accomplish.
Richmond Fed Economic Brief , Volume 26 , Issue 17

Briefing
Is the output gap a faulty gauge for monetary policy?
Lubik, Thomas A. (2010-01)
Policymakers look to the output gap as a measure of how the economy is performing. However, different methods of computing the output gap can lead to vastly different results, rendering it a potentially poor guide.
Richmond Fed Economic Brief , Issue Jan

Journal Article
Non-stationarity and instability in small open-economy models even when they are "closed"
Lubik, Thomas A. (2007-10)
Economic Quarterly , Volume 93 , Issue Fall , Pages 393-412

Briefing
Calculating the Natural Rate of Interest: A Comparison of Two Alternative Approaches
Lubik, Thomas A.; Matthes, Christian (2015-10)
The natural rate of interest is a key concept in monetary economics because its level relative to the real rate of interest allows economists to assess the stance of monetary policy. However, the natural rate of interest cannot be observed; it must be calculated using identifying assumptions. This Economic Brief compares the popular Laubach-Williams approach to calculating the natural rate with an alternative method that imposes fewer theoretical restrictions. Both approaches indicate that the natural rate has been above the real rate for a long time.
Richmond Fed Economic Brief , Issue Oct

Briefing
How Expectations About Future Productivity Drive Inventories
Lubik, Thomas A.; Gortz, Christoph; Gunn, Christopher (2022-03)
To what extent do expectations about future productivity developments drive business cycles? This Economic Brief reviews the state of the literature and discusses how new research by the authors establishes a novel method to answer. We specifically focus on firms' inventories, which stock goods available for future sales. We find that these inventories expand strongly to news about future productivity developments. This confirms that expectations about future productivity are a powerful force behind aggregate fluctuations, a finding with important implications for widely used economic models.
Richmond Fed Economic Brief , Volume 22 , Issue 03

Working Paper
Global Dynamics in a Search and Matching Model of the Labor Market
Lubik, Thomas A.; Lazaryan, Nika (2017-10-20)
We study global and local dynamics of a simple search and matching model of the labor market. We show that the model can be locally indeterminate or have no equilibrium at all, but only for parameterizations that are empirically implausible. In contrast to the local results, we show that the model exhibits chaotic and periodic dynamics for reasonable parameter values both in backward and forward time. In contrast to earlier work, we establish these results analytically without placing numerical restrictions on the parameters.
Working Paper , Paper 17-12

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