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This paper derives the restrictions imposed by Barro and Gordon's theory of time-consistent monetary policy on a bivariate time-series model for in#ation and unemployment and tests those restrictions using quarterly US data from 1960 through 1997. The results show that the data are consistent with the implications of the theory for the long-run behavior of(More)
Macroeconomics Conference in Minneapolis. We are also grateful to Michelle Barnes and Dean Croushore for valuable comments on earlier versions of this paper. The views expressed in this paper are those of the individual authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Abstract This(More)
This article investigates the statistical properties of the U.S. sacrii ce ratio—the cumulative output loss arising from a permanent reduction in in ation. We derive estimates of the sacrii ce ratio from three structural vector autoregression models and then conduct a series of simulation exercises to analyze their sampling distribution. We obtain point(More)
istorically, inflation has followed a fairly predictable course in relation to the business cycle. Inflation typically rises during an economic expansion, peaks slightly after the onset of recession, and then continues to decline through the first year or two of recovery. During the present U.S. expansion, however, inflation has taken a markedly different(More)
This paper provides an empirical investigation into the relationship between ex ante U.S. labor contract durations and uncertainty over the period 1970 to 1995. We construct measures of inflation uncertainty as well as aggregate nominal and real uncertainty. The results not only corroborate previous findings of an inverse relationship between contract(More)
The acceleration of productivity since 1995 has prompted a debate over whether the economy's underlying growth rate will remain high. In this paper, we draw on growth theory to identify variables other than productivity— namely consumption and labor compensation—to help estimate trend productivity growth. We treat that trend as a common factor with two(More)
This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments. The views expressed in the paper are those of the authors and are not necessarily reflective of views at the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions(More)
and Simon Potter for helpful comments and discussions. We would also like to thank Jordi Gali and Ken Kuttner for their assistance with programs used in performing the computations. The views expressed in this paper are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. The(More)
Second Second district highlights Second district highlights The ability to identify periods of expansion and contraction associated with business cycles has widespread implications for the economy. If consumers perceive wage growth as being strong and job security high, for example, they might make more purchases, whereas businesses that sense that the(More)
This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments. The views expressed in the paper are those of the authors and are not necessarily reflective of views at the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions(More)