From the NBER

Some papers from the NBER that caught my interest:

How Frequent Are Small Price Changes?, by Martin S. Eichenbaum, Nir Jaimovich, Sergio Rebelo and Josephine Smith, NBER Working Paper No. 17956, March 2012: Recent empirical work suggests that small price changes are relatively common. These findings have been used to evaluate competing theories of nominal price rigidities. In this paper we use micro data from the consumer price index and a scanner data set from a national supermarket chain to reassess the importance of small price changes. We argue that the vast majority of these changes are due to measurement error. We conclude that small price changes are too small a phenomenon for macro modelers to be concerned with. [open link]

Liquidity, Business Cycles, and Monetary Policy, by Nobuhiro Kiyotaki and John Moore, NBER Working Paper No. 17934, March 2012: The paper presents a model of a monetary economy where there are differences in liquidity across assets. Money circulates because it is more liquid than other assets, not because it has any special function. There is a spectrum of returns on assets, reflecting their differences in liquidity. The model is used, first, to investigate how aggregate activity and asset prices fluctuate with shocks to productivity and liquidity; second, to examine what role government policy might have through open market operations that change the mix of assets held by the private sector. With its emphasis on liquidity rather than sticky prices, the model harks back to an earlier interpretation of Keynes (1936), following Tobin (1969). [open link]

Who Suffers During Recessions, by? Hilary W. Hoynes, Douglas L. Miller and Jessamyn Schaller, NBER Working Paper No. 17951, March 2012: In this paper we examine how business cycles affect labor market outcomes in the United States. We conduct a detailed analysis of how cycles affect outcomes differentially across persons of differing age, education, race, and gender, and we compare the cyclical sensitivity during the Great Recession to that in the early 1980s recession. We present raw tabulations and estimate a state panel data model that leverages variation across US states in the timing and severity of business cycles. We find that the impacts of the Great Recession are not uniform across demographic groups and have been felt most strongly for men, black and Hispanic workers, youth, and low education workers. These dramatic differences in the cyclicality across demographic groups are remarkably stable across three decades of time and throughout recessionary periods and expansionary periods. For the 2007 recession, these differences are largely explained by differences in exposure to cycles across industry-occupation employment. [open link]