Policy Watch: Debt Relief

By Serkan Arslanalp and Peter Blair Henry

Journal of Economic Perspectives, Winter 2006

At the Gleneagles summit in July 2005, the heads of state from the G-8 countries—the United States, Canada, France, Germany, Italy, Japan, Russia and the United Kingdom—called on the International Monetary Fund (IMF), the World Bank and the African De...

Front Matter

American Economic Journal: Macroeconomics, April 2022

Agricultural Diversity, Structural Change, and Long-Run Development: Evidence from the United States

By Martin Fiszbein

American Economic Journal: Macroeconomics, April 2022

This paper examines the role of agricultural diversity in the process of development. Using data from US counties and exploiting climate-induced variation in agricultural production patterns, I show that mid-nineteenth-century agricultural diversity had p...

Optimal Currency Areas with Labor Market Frictions

By Rohan Kekre

American Economic Journal: Macroeconomics, April 2022

I study efficiency and optimal monetary policy in a two-country monetary union with frictional labor markets. With heterogeneity in labor market frictions, the constrained efficient allocation generically cannot be achieved even if productivity shocks aff...

Does Consumption Respond to Transitory Shocks? Reconciling Natural Experiments and Semistructural Methods

By Jeanne Commault

American Economic Journal: Macroeconomics, April 2022

Studies based on natural experiments find that consumption responds strongly and significantly to a transitory variation in income, while semistructural estimations find no pass-through of transitory shocks to consumption. I develop a more robust semistru...

Sectoral Heterogeneity and Monetary Policy

By Jonathan Kreamer

American Economic Journal: Macroeconomics, April 2022

Since sectors differ in their sensitivity to interest rates, monetary policy produces inefficient sectoral fluctuations. In a model with sectoral heterogeneity, I show that policymakers should weight sectors proportionally to their interest elasticities, ...

A Theory of Structural Change That Can Fit the Data

By Simon Alder, Timo Boppart, and Andreas Müller

American Economic Journal: Macroeconomics, April 2022

We study structural change in the historical consumption expenditure of the United States, the United Kingdom, Canada, and Australia over more than a century. We characterize the most general class of preferences in a time-additive setting that admits agg...

Skewed Idiosyncratic Income Risk over the Business Cycle: Sources and Insurance

By Christopher Busch, David Domeij, Fatih Guvenen, and Rocio Madera

American Economic Journal: Macroeconomics, April 2022

We provide new evidence on business cycle fluctuations in skewed labor income risk in the United States, Germany, Sweden, and France. We document four results. First, in all countries, the skewness of individual income growth is strongly procyclical, wher...

Anomalies: Utility Maximization and Experienced Utility

By Daniel Kahneman and Richard H. Thaler

Journal of Economic Perspectives, Winter 2006

In this column, we discuss a version of the utility maximization hypothesis that can be tested—and we find that it is false. We review empirical challenges to utility maximization, which return to the old question of whether preferences optimize the exp...

Asset Price Booms and Macroeconomic Policy: A Risk-Shifting Approach

By Franklin Allen, Gadi Barlevy, and Douglas Gale

American Economic Journal: Macroeconomics, April 2022

This paper uses a risk-shifting model to analyze policy responses to asset price booms. We show risk shifting leads to inefficient asset and credit booms in which asset prices can exceed fundamentals. However, the inefficiencies associated with risk shift...

Pigouvian Cycles

By Renato Faccini and Leonardo Melosi

American Economic Journal: Macroeconomics, April 2022

Current and expected unemployment rates contain information that is highly useful to estimate the effect of news about TFP and to allow a general equilibrium rational expectations model to generate Pigouvian cycles: a large fraction of the comovement of o...

High Marginal Tax Rates on the Top 1 Percent? Lessons from a Life-Cycle Model with Idiosyncratic Income Risk

By Fabian Kindermann and Dirk Krueger

American Economic Journal: Macroeconomics, April 2022

This paper argues that high marginal labor income tax rates on top earners are an effective tool for social insurance even when households have high labor supply elasticity, households make dynamic savings decisions, and policies have general equilibrium ...

Income Differences, Productivity, and Input-Output Networks

By Harald Fadinger, Christian Ghiglino, and Mariya Teteryatnikova

American Economic Journal: Macroeconomics, April 2022

We study the importance of input-output (IO) linkages and sectoral productivity (TFP) in determining cross-country income differences. We find that while highly connected sectors are more productive than the typical sector in poor countries, the opposite ...

Entry Barriers, Idiosyncratic Distortions, and the Firm Size Distribution

By Roberto N. Fattal-Jaef

American Economic Journal: Macroeconomics, April 2022

This paper studies the interaction between barriers to firm entry and distortions to allocative efficiency in a standard model of firm dynamics. We derive a strategy to infer entry barriers based on cross-country differences in the firm size distribution ...

Credit Spreads, Financial Crises, and Macroprudential Policy

By Ozge Akinci and Albert Queralto

American Economic Journal: Macroeconomics, April 2022

Credit spreads display occasional spikes and are more strongly countercyclical in times of elevated financial stress. Financial crises are extreme cases of this nonlinear behavior, featuring skyrocketing credit spreads, sharp losses in bank equity, and de...

Recommendations for Further Reading

By Timothy Taylor

Journal of Economic Perspectives, Winter 2006

Notes

Journal of Economic Perspectives, Winter 2006

Front Matter

American Economic Journal: Microeconomics, May 2022

Tractable Model of Dynamic Many-to-Many Matching

By Marcin Pęski

American Economic Journal: Microeconomics, May 2022

We develop a tractable, dynamic, and strategic model of many-to-many matching with payoff externalities across links. The joint dynamic surplus or certain second properties of individual utilities, like pay-off externalities, can typically be identified. ...