efficient tightness

This minicourse presents basic facts about business cycles. It then develops a matching model to explain these business-cycle facts. Finally, it explains how monetary policy and government spending should be designed to tame business cycles.

This paper develops a sufficient-statistic formula for the unemployment gap. The formula depends on the elasticity of the Beveridge curve, cost of unemployment, and recruiting cost. In the United States the unemployment gap is countercyclical and often positive.