This paper argues that in the United States the full-employment rate of unemployment (FERU) is the geometric average of the unemployment and vacancy rates. Between 1930 and 2024, the FERU averages 4.1% and is very stable.
This paper develops a simple business-cycle model with divine coincidence: inflation is on target when unemployment is efficient. The divine coincidence arises from directed search under a quadratic price-adjustment cost.
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 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 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.