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Author:Fisher, Jonas D. M. 

Working Paper
The role of real wages, productivity, and fiscal policy in Germany's Great Depression, 1928-37

We study the behavior of output, employment, consumption, and investment in Germany during the Great Depression of 1928-37. In this time period, real wages were countercyclical, and productivity and fiscal policy was procyclical. We use the neoclassical growth model to investigate how much these factors contribute to the depression. We find that real wages, which were significantly above their market clearing levels, were the most important factor for the economic decline in the depression. Changes in productivity and fiscal policy were also important for the decline and recovery. Even though ...
Working Paper , Paper 01-07

Journal Article
How does an increase in government purchases affect economy?

This article studies the impact on aggregate economic activity of increases in defense purchases which are unrelated to other developments in the economy. The authors use empirical evidence to evaluate the predictions of several prominent models.
Economic Perspectives , Volume 22 , Issue Q III , Pages 29-43

Newsletter
Changes in the Risk-Management Environment for Monetary Policy

In response to the massive challenges presented by the global financial crisis, in late 2007 the Federal Open Market Committee (FOMC) began a series of large reductions in its traditional policy tool, the overnight interest rate in the federal funds market. By December 2008 the Committee had lowered the target to its effective lower bound (ELB) of 0 to 25 basis points.1 Later, in an attempt to provide additional monetary stimulus, the FOMC implemented nontraditional policy tools, such as large-scale asset purchases and forward guidance about how long the fed funds rate would stay at very low ...
Chicago Fed Letter

Working Paper
The limits of forward guidance

The viability of forward guidance as a monetary policy tool depends on the horizon over which it can be communicated and its influence on expectations over that horizon. We develop and estimate a model of imperfect central bank communications and use it to measure how effectively the Fed has managed expectations about future interest rates and the influence of its communications on macroeconomic outcomes. Standard models assume central banks have perfect control over expectations about the policy rate up to an arbitrarily long horizon and this is the source of the so-called ?forward guidance ...
Working Paper Series , Paper WP-2019-3

Working Paper
Mortgage choices and housing speculation

We describe a rational expectations model in which speculative bubbles in house prices can emerge. Within this model both speculators and their lenders use interest-only mortgages (IOs) rather than traditional mortgages when there is a bubble. Absent a bubble, there is no tendency for IOs to be used. These insights are used to assess the extent to which house prices in US cities were driven by speculative bubbles over the period 2000-2008. We find that IOs were used sparingly in cities where elastic housing supply precludes speculation from arising. In cities with inelastic supply, where ...
Working Paper Series , Paper WP-2010-12

Working Paper
Macroeconomic effects of Federal Reserve forward guidance

A large output gap accompanied by stable inflation close to its target calls for further monetary accommodation, but the zero lower bound on interest rates has robbed the Federal Open Market Committee (FOMC) of the usual tool for its provision. We examine how public statements of FOMC intentions?forward guidance?can substitute for lower rates at the zero bound. We distinguish between Odyssean forward guidance, which publicly commits the FOMC to a future action, and Delphic forward guidance, which merely forecasts macroeconomic performance and likely monetary policy actions. Others have shown ...
Working Paper Series , Paper WP-2012-03

Working Paper
Stock market and investment good prices: implications of macroeconomics

Stock market prices are procyclical, while investment good prices are countercyclical. A real business cycle model calibrated to these observations implies that 75% of the cyclical variation in aggregate output is due to an investment-specific technology shock, while the rest is due to an aggregate productivity shock. To test this conclusion, we investigate the model's implications for asset prices and business cycles. The model does not do significantly worse than existing models on these dimensions, and on two dimensions it does notably better. It is consistent with the facts: (i) ...
Working Paper Series , Paper WP-98-6

Working Paper
A real explanation for heterogeneous investment dynamics

Household investment, that is investment in consumer durables and housing, leads non-residential fixed investment over the U.S. business cycle. This observation represents a potent challenge to real business cycle (RBC) theory. First of all the theory has been unable to account for it. In addition, research suggests the observation is driven by monetary shocks, supporting the view that these shocks play a leading role in the U.S. business cycle. This paper shows that RBC theory is consistent with the investment dynamics after all. It does so by generalizing the standard home production ...
Working Paper Series , Paper WP-01-14

Discussion Paper
(S,s) inventory policies in general equilibrium

We study the aggregate implications of (S,s) inventory policies in a dynamic general equilibrium model. Firms in the model's retail sector face idiosyncratic demand risk, and (S,s) inventory policies are optimal because of fixed order costs. The model economy replicates salient features of the business cycle and reconciles evidence that orders are more volatile than sales, and that inventory investment is positively correlated with sales. There are two main results. First, we find that general equilibrium effects and the optimal order size are important for the economy's response to exogenous ...
Discussion Paper / Institute for Empirical Macroeconomics , Paper 104

Working Paper
Fiscal policy in the aftermath of 9/11

This paper investigates the nature of U.S. fiscal policy in the aftermath of 9/11. We argue that the recent dramatic fall in the government surplus and the large fall in tax rates cannot be accounted for by either the state of the U.S. economy as of 9/11 or as the typical response of fiscal policy to a large exogenous rise in military expenditures. Our evidence suggests that, had tax rates responded in the way they ?normally? do to large exogenous changes in government spending, aggregate output would have been lower and the surplus would not have changed by much. The unusually large fall in ...
Working Paper Series , Paper WP-04-06

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