Journal of Money, Credit, and Banking - Volume 35, Number 6 (Part 2), December 2003
Aggregate Returns to Scale: Why Measurement Is Imprecise (2001)
Harold L. Cole, Lee E. Ohanian
The extent to which there are aggregate returns to scale at the level of aggregate production has important implications both for the types of shocks generating business cycles and for optimal...
The Great Depression in the United States From A Neoclassical Perspective (2001)
Harold L. Cole, Lee E. Ohanian
Can neoclassical theory account for the Great Depression in the United States--- both the downturn in output between 1929 and 1933 and the recovery between 1934 and 1939? Yes and no. Given the large...
The Macroeconomic Effects of Big Fiscal Shocks: The Case of World War II (2001)
Ellen R. Mcgrattan, Lee E. Ohanian
this paper, we re-examine whether standard theory can account for macroeconomic performance during World War II, including changes in hours worked, consumption, investment, and wages and interest...
Dynamic Equilibrium Economies: A Framework for Comparing Models and Data (1999)
Lee E. Ohanian, Jeremy Berkowitz, Francis X. Diebold
: We propose a constructive, multivariate framework for assessing agreement between (generally misspecified) dynamic equilibrium models and data, which enables a complete second-order comparison of...
Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis (1997)
Per Krusell, Lee E. Ohanian, Giovanni L. Violante
There have been striking postwar changes in the supply and price of skilled labor relative to unskilled labor. The relative quantity of skilled labor has increased substantially, and the skill...
Why did productivity fall so much during the Great Depression?
This study assesses five common explanations for the large decline in U.S. total factor productivity (TFP) during the Great Depression: changes in capacity utilization, factor input quality, and...
Why Have Business Cycle Fluctuations Become Less Volatile?
Andres Arias, Gary D. Hansen, Lee E. Ohanian
This paper shows that a standard Real Business Cycle model driven by productivity shocks can successfully account for the 50 percent decline in cyclical volatility of output and its components, and...
Latin America in the Rearview Mirror
Harold L. Cole, Lee E. Ohanian, Alvaro Riascos
Latin American countries are the only Western countries that are poor and that aren't gaining ground on the United States. This paper evaluates why Latin America has not replicated Western economic...
Deflation and the International Great Depression: A Productivity Puzzle
Harold L. Cole, Lee E. Ohanian, Ron Leung
This paper develops the first dynamic, stochastic, general equilibrium analysis of the International Great Depression. We construct a new version of Lucas?s (1972) monetary misperceptions model, with...
Does neoclassical theory account for the effects of big fiscal shocks? Evidence from World War II
Ellen R. McGrattan, Lee E. Ohanian
There is much debate about the usefulness of the neoclassical growth model for assessing the macroeconomic impact of fiscal shocks. We test the theory using data from World War II, which is by far...
Unit Roots, Trend Breaks, and Transitory Dynamics: A Macroeconomic Perspective.
It is common to interpret rejections of the unit-root null hypothesis in favor of a trend stationary process with possible trend breaks as evidence that the data are better characterized as...
Latin America in the rearview mirror
Cole, Harold L., Ohanian, Lee E., Riascos, Alvaro, Schmitz, James Jr
The Great U.K. Depression: A Puzzle and Possible Resolution
Harold L. Cole, Lee E. Ohanian
The UK was depressed for 20 years between the two World Wars. The decrease in output was entirely due to lower hours per worker and lower employment. Our main finding is that generous unemployment...
Are Phillips curves useful for forecasting inflation?
Andrew Atkeson, Lee E. Ohanian.
This study evaluates the conventional wisdom that modern Phillips curve-based models are useful tools for forecasting inflation. These models are based on the non-accelerating inflation rate of...
Latin America in the rearview mirror
Harold L. Cole, Lee E. Ohanian, Alvaro Riascos
Latin American countries are the only Western countries that are poor and that aren?t gaining ground on the United States. This article evaluates why Latin America has not replicated Western economic...
The Macroeconomic Effects of War Finance in the United States: World War II and the Korean War.
During World War II, government expenditures were financed primarily by issuing debt. During the Korean War, expenditures were financed almost exclusively by higher taxes, reflecting President...
Dynamic equilibrium economies: a framework for comparing models and data
Francis X. Diebold, Lee E. Ohanian, Jeremy Berkowitz
We propose a constructive, multivariate framework for assessing agreement between (generally misspecified) dynamic equilibrium models and data, which enables a complete second-order comparison of the...
The Great Depression in the United States from a neoclassical perspective
Harold L. Cole, Lee E. Ohanian
Can neoclassical theory account for the Great Depression in the United States—both the downturn in output between 1929 and 1933 and the recovery between 1934 and 1939? Yes and no. Given the large...
Aggregate returns to scale: why measurement is imprecise
Harold L. Cole, Lee E. Ohanian
The extent to which there are aggregate returns to scale at the level of aggregate production has important implications both for the types of shocks generating business cycles and for optimal...
When the bubble bursts: psychology or fundamentals?
The prices of stocks, bonds, and other assets frequently fluctuate, and sometimes these fluctuations are quite large. Such price shifts have important economic implications, including the possibility...
How capital taxes harm economic growth: Britain versus the United States
The different methods used by Great Britain and the United States to finance World War II had a significant impact on postwar economic growth in the two countries. In this article, Lee Ohanian...
Ohanian, Lee E, Stockman, Alan C
This paper examines the effects of money supply changes on exchange rates, interest rates, and production in an optimizing two-country model in which some sectors of the economy have predetermined...
Data Appendix to The Great U.K. Depression: A Puzzle and Possible Resolution
Harold L. Cole, Lee E. Ohanian
Detailed macroeconomic data to accompany the article in the Review of Economic Dynamics
Dynamic Equilibrium Economies: A Framework for Comparing Models and Data.
Diebold, Francis X, Ohanian, Lee E, Berkowitz, Jeremy
The authors propose a constructive, multivariate framework for assessing agreement between (generally misspecified) dynamic equilibrium models and data, which enables a complete second-order...
Deflation, Real Wages, and the International Great Depression: A Productivity Puzzle
Ron Leung, Harold L. Cole, Lee E. Ohanian
The high real wage story is one of the leading hypotheses for how deflation caused the International Great Depression. The story is that world-wide deflation, combined with incomplete nominal wage...
Capital-skill complementarity and inequality: a macroeconomic analysis
Per Krusell, Lee E. Ohanian, Giovanni L. Violante
The notion of skilled-biased technological change is often held responsible for the recent behavior of the U.S. skill premium, or the ratio between the wages of skilled and unskilled labor. This...
Dynamic equilibrium economies: a framework for comparing models and data
Francis X. Diebold, Lee E. Ohanian, Jeremy Berkowitz
We propose a constructive, multivariate framework for assessing agreement between (generally misspecified) dynamic equilibrium models and data, a framework which enables a complete second-order...
Is there a trend break in U.S. GNP? A macroeconomic perspective
Unit root tests against trend break alternatives are based on the premise that the dating of the trend breaks coincides with major economic events with permanent effects on economic activity, such as...
Complex eigenvalues and trend-reverting fluctuations
Costas Azariadis, James Bullard, Lee E. Ohanian
Autoregressions of quarterly or annual aggregate time series provide evidence of trend-reverting output growth and of short-term dynamic adjustment that appears to be governed by complex eigenvalues....
The demand for money and the nonneutrality of money
Harold L. Cole, Lee E. Ohanian
Many economists have worried about changes in the demand for money, since money demand shocks can affect output variability and have implications for monetary policy. This paper studies the...
The defining moment: a review essay
This paper reviews The Defining Moment, edited by Michael D. Bordo, Claudia Goldin, and Eugene N. White. The volume studies how the Great Depression changed government policies, including changes in...
Re-examining the contributions of money and banking shocks to the U.S. Great Depression
Harold L. Cole, Lee E. Ohanian
This paper quantitatively evaluates the hypothesis that deflation can account for much of the Great Depression (1929–33). We examine two popular explanations of the Depression: (1) The “high...
Why did productivity fall so much during the Great Depression?
Between 1929 and 1933, real output per adult fell over 30 percent and total factor productivity fell 18 percent. This productivity decrease is much larger than expected from just extrapolating the...
The great U.K. depression: a puzzle and possible resolution
Harold L. Cole, Lee E. Ohanian
Between 1913 and 1929, real GDP per person in the UK fell 1 percent, while this same measure of economic activity rose about 25 percent in the rest of the world. Why was Britain so depressed in a...
Latin America in the rearview mirror
Harold L. Cole, Lee E. Ohanian, Alvaro Riascos
Latin American countries are the only Western countries that are poor and that aren?t gaining ground on the United States. This paper evaluates why Latin America has not replicated Western economic...
Deflation and the international Great Depression: a productivity puzzle
Harold L. Cole, Lee E. Ohanian, Ron Leung
This paper presents a dynamic, stochastic general equilibrium study of the causes of the international Great Depression. We use a fully articulated model to assess the relative contributions of...
The effects of real and monetary shocks in a business cycle model with some sticky prices
Lee E. Ohanian, Alan C. Stockman, Lutz Killian
Monetary policy ; Econometric models ; Business cycles ; Prices
Lee E. Ohanian, Alan C. Stockman
Monetary policy ; Money supply
Reassessing aggregate returns to scale with standard theory and measurement
Harold L. Cole, Lee E. Ohanian
Constant returns to scale is a central construct of neoclassical theory. Previous studies argued that one must adopt a specification of the production function with substantial unobserved service...
Shrinking money and monetary business cycles
Harold L. Cole, Lee E. Ohanian
In the postwar period velocity has risen so sharply in the U.S. that the ratio of money to nominal output has fallen by a factor of three. We analyze the implications of shrinking money for the real...
The macroeconomic effects of big fiscal shocks: the case of World War II
Ellen R. McGrattan, Lee E. Ohanian
Macroeconomics - Econometric models
New Deal policies and the persistence of the Great Depression: a general equilibrium analysis
Harold L. Cole, Lee E. Ohanian
There are two striking aspects of the recovery from the Great Depression in the United States: the recovery was very weak and real wages in several sectors rose significantly above trend. These data...
Dynamic equilibrium economies: a framework for comparing models and data
Francis X. Diebold, Lee E. Ohanian, Jeremy Berkowitz
The authors propose a constructive, multivariate framework for assessing agreement between (generally misspecified) dynamic equilibrium models and data, which enables a complete second-order...
Short-run effects on money when some prices are sticky
Lee E. Ohanian, Alan C. Stockman
Money ; Prices
There is a large literature, including work by Hall (1997), Chari, Kehoe, and McGrattan (2002), Gali, Gertler, and Lopez-Salido (2002), and many others that has studied the gap between the...
A Note on Spurious Inference in a Linearly Detrended Vector Autoregression.
A simulation study is designed to evaluate the sensitivity of inference in a Vector Autoregression in which the variables of interest (GNP, the money stock, the price level, and a short-term interest...
Back to the future with Keynes
This article analyzes Keynes's "Economic Possibilities for our Grandchildren"- an essay presenting Keynes's views about economic growth into the 21st century - from the perspective of modern growth...
Alan C. Stockman, Lee E. Ohanian
Economists generally assert that countries sacrifice monetary independence when they peg their exchange rates. At the same time, central bankers frequently assert that pegging an exchange rate does...
Does Neoclassical Theory Account for the Effects of Big Fiscal Shocks? Evidence From World War II
Ellen R. McGrattan, Lee E. Ohanian
There is much debate about the usefulness of the neoclassical growth model for assessing the macro- economic impact of fiscal shocks. We test the theory using data from World War II, which is by far...
Dynamic Equilibrium Economies: A Framework for Comparing Models and Data
Francis X. Diebold, Lee E. Ohanian, Jeremy Berkowitz
Many recent theoretical papers have come under attack for modeling prices as Geometric Brownian Motion. This process can diverge over time, implying that firms facing this price process can earn...
Postwar British Economic Growth and the Legacy of Keynes.
Cooley, Thomas F, Ohanian, Lee E
Following John Maynard Keynes's recommendations, Britain taxed capital income at a much higher rate than the United States during the war and for much of the postwar period. This paper presents a...