Search Results
Working Paper
The Changing Nature of Technology Shocks
We document changes to the pattern of technology shocks and their propagation in post-war U.S. data. Using an agnostic identification procedure, we show that the dominant shock driving total factor productivity (TFP) is akin to a diffusion or news shock and that shock transmission has changed over time. Specifically, the behavior of hours worked is notably different before and after the 1980s. In addition, the importance of technology shocks as a major driver of aggregate fluctuations has increased over time. They play a dominant role in the second subsample, but much less so in the first. We ...
Working Paper
Flexible prices, labor market frictions, and the response of employment to technology shocks
Recent empirical evidence establishes that a positive technology shock leads to a decline in labor inputs. Can a flexible price model enriched with labor market frictions replicate this stylized fact? We develop and estimate a standard flexible price model using Bayesian methods that allows, but does not require, labor market frictions to generate a negative response of employment to a technology shock. We find that labor market frictions account for the fall in labor inputs.
Working Paper
Stock-Bond Return Correlation, Bond Risk Premium Fundamentals, and Fiscal-Monetary Policy Regime
We incorporate regime switching between monetary and fiscal policies in a general equilibrium model to explain three stylized facts: (1) the positive stock-bond return correlation from 1971 to 2000 and the negative one after 2000, (2) the negative correlation between consumption and inflation from 1971 to 2000 and the positive one after 2000, and (3) the coexistence of positive bond risk premiums and the negative stock-bond return correlation. We show that two distinctive shocks—the technology and investment shocks—drive positive and negative stock-bond return correlations under two ...
Working Paper
The Cyclical Behavior of Labor Force Participation
We document that labor force participation declines in the short run following a positive technology shock. The countercyclical response of labor force participation to a technology shock contrasts with the well documented mild procyclical behavior of labor force participation in the business cycle. In a search model of the labor market that incorporates a participation choice, we show that a positive technology shock reduces labor force participation in the short run under a reasonable calibration. In the calibrated model, discount factor shocks induce a procyclical response of labor force ...