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 shows that under simple but realistic assumptions, the efficient unemployment rate u* is the geometric average of the unemployment and vacancy rates. In the United States, 1930–2022, u* is stable and averages 4.1%.
This graduate course presents various matching models of economic slack. It uses them to study business-cycle fluctuations; Keynesian, classical, and frictional unemployment; optimal monetary policy and the zero lower bound; and optimal government spending.
This paper develops a policy-oriented business-cycle model with fluctuating unemployment and long zero-lower-bound episodes. The innovations are that producers and consumers meet through a matching function, and wealth enters the utility function.
This graduate course presents various matching models of unemployment. It uses them to study unemployment fluctuations, job rationing, unemployment gap, and labor market policies—minimum wage, payroll tax, public employment, and unemployment insurance.
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.
This paper shows that when unemployment is inefficient, optimal public expenditure deviates from the Samuelson rule to reduce the unemployment gap. Optimal stimulus spending depends on the unemployment gap, unemployment multiplier, and an elasticity of substitution.