The Power of Forward Guidance Revisited

By Alisdair McKay, Emi Nakamura, and Jón Steinsson

American Economic Review, October 2016

In recent years, central banks have increasingly turned to forward guidance as a central tool of monetary policy. Standard monetary models imply that far future forward guidance has huge effects on current outcomes, and these effects grow with the horizon...

Trade, Domestic Frictions, and Scale Effects

By Natalia Ramondo, Andrés Rodríguez-Clare, and Milagro Saborío-Rodríguez

American Economic Review, October 2016

Because of scale effects, idea-based growth models imply that larger countries should be much richer than smaller ones. New trade models share the same counterfactual feature. In fact, new trade models exhibit other counterfactual implications associated ...

On the Timing and Pricing of Dividends: Comment

By Florian Schulz

American Economic Review, October 2016

I present novel empirical evidence on the term structure of the equity risk premium. In contrast to previous research that documented high discount rates for the short-term component of the market portfolio, I show evidence for an unconditionally flat ter...

On the Timing and Pricing of Dividends: Reply

By Jules H. van Binsbergen and Ralph S. J. Koijen

American Economic Review, October 2016

Schulz (2016) replicates the findings of van Binsbergen, Brandt, and Koijen (2012)--henceforth, BBK--and agrees that the average pretax returns on short-term dividend strips are higher than those of the index, but argues that the after-tax returns are not...

Front Matter

American Economic Journal: Macroeconomics, October 2016

Transfer Payments and the Macroeconomy: The Effects of Social Security Benefit Increases, 1952-1991

By Christina D. Romer and David H. Romer

American Economic Journal: Macroeconomics, October 2016

This paper uses Social Security benefit increases from 1952 to 1991 to investigate the macroeconomic effects of changes in transfers. It finds a large, immediate, and significant positive response of consumption to permanent benefit increases. The respons...

Pushing on a String: US Monetary Policy Is Less Powerful in Recessions

By Silvana Tenreyro and Gregory Thwaites

American Economic Journal: Macroeconomics, October 2016

We investigate how the response of the US economy to monetary policy shocks depends on the state of the business cycle. The effects of monetary policy are less powerful in recessions, especially for durables expenditure and business investment. The asymme...

The Macroeconomic Effects of Monetary Policy: A New Measure for the United Kingdom

By James Cloyne and Patrick Hürtgen

American Economic Journal: Macroeconomics, October 2016

This paper estimates the effects of monetary policy based on a new, extensive real-time dataset for the United Kingdom. Employing the Romer-Romer identification approach we construct a new measure of monetary policy innovations and find that a 1 percentag...

Debt Portfolios and Homestead Exemptions

By Thomas Hintermaier and Winfried Koeniger

American Economic Journal: Macroeconomics, October 2016

This paper investigates the economic relevance of the large differences in homestead exemptions across US states. We build a structural model for an equilibrium analysis of debt-portfolio choices over the life cycle. Our analysis captures key patterns fro...

Public Debt and Changing Inflation Targets

By Michael U. Krause and Stéphane Moyen

American Economic Journal: Macroeconomics, October 2016

What are the effects of a higher central bank inflation target on the burden of real public debt? Several recent proposals have suggested that even a moderate increase in the inflation target can have a pronounced effect on real public debt. We consider t...

The Great Recession: A Self-Fulfilling Global Panic

By Philippe Bacchetta and Eric van Wincoop

American Economic Journal: Macroeconomics, October 2016

While the 2008-2009 financial crisis originated in the United States, output, consumption, and investment declined by similar magnitudes around the globe. Given the partial integration of both goods and financial markets, what can account for the remarkab...

Financial Intermediation, Leverage, and Macroeconomic Instability

By Gregory Phelan

American Economic Journal: Macroeconomics, October 2016

This paper investigates how financial sector leverage affects macroeconomic instability and welfare. In the model, banks borrow (use leverage) to allocate resources to productive projects and provide liquidity. When banks do not actively issue new equity,...

Front Matter

American Economic Journal: Microeconomics, November 2016

An Alternative to Signaling: Directed Search and Substitution

By Matthew Levy and Balázs Szentes

American Economic Journal: Microeconomics, November 2016

This paper analyzes a labor market, where: workers can acquire an observable skill at no cost, firms differ in unobserved productivity, workers' skill and firms' productivity are substitutes, and firms' search is directed. The main result is that, if the ...

Delegating Multiple Decisions

By Alex Frankel

American Economic Journal: Microeconomics, November 2016

This paper shows how to extend the heuristic of capping an agent against her bias to delegation problems over multiple decisions. Caps may be exactly optimal when the agent has constant biases, in which case a cap corresponds to a ceiling on the weighted ...

Testing the General Validity of the Heckscher-Ohlin Theorem

By Daniel M. Bernhofen and John C. Brown

American Economic Journal: Microeconomics, November 2016

We exploit Japan's mid-nineteenth century transition from autarky to open trade to test Alan Deardorff's (1982) seminal and parsimonious autarky price formulation of the Heckscher-Ohlin theorem. Factor price data from Japan's late autarky period impose a ...

News Aggregators and Competition among Newspapers on the Internet

By Doh-Shin Jeon and Nikrooz Nasr

American Economic Journal: Microeconomics, November 2016

This paper studies how news aggregators affect the quality choices of newspapers competing on the Internet. To provide a micro-foundation for the role of the aggregator, we build a model of multiple issues where newspapers choose their quality on each iss...

The (Human) Sampler's Curses

By Mark Thordal-Le Quement

American Economic Journal: Microeconomics, November 2016

We present a cheap talk model in which a receiver (R) sequentially consults multiple experts who are either unbiased or wish to maximize R's action, bias being unobservable. Consultation is costly and R cannot commit to future consultation behavior. We fi...

Voluntary Contributions and Collective Redistribution

By Andrzej Baranski

American Economic Journal: Microeconomics, November 2016

I study a multilateral bargaining game in which committee members invest in a common project prior to redistributing the total value of production. The game corresponds to a Baron and Ferejohn (1989) legislative bargaining model preceded by a production s...

Naked Exclusion with Private Offers

By Jeanine Miklós-Thal and Greg Shaffer

American Economic Journal: Microeconomics, November 2016

We consider a seller's ability to deter potential entrants by offering exclusive contracts to downstream buyers. Previous literature has shown that this can be a profitable strategy if there is a coordination failure on the part of the buyers or if the se...