We estimate a state-of-the-art DSGE model to study the natural rate of interest in the United States over the last 20 years. The natural rate is highly procyclical, and fell substantially below zero in each of the last three recessions. Although the drop was of comparable magnitude across the three recessions, the decline was considerably more persistent in the Great Recession. We discuss the usefulness and limitations, particularly due to the zero lower bound, of the natural rate for the conduct of monetary policy.

Innovations to consumer confidence convey incremental information about economic activity far into the future. Does this reflect a causal effect of animal spirits on economic activity, or news about exogenous future productivity received by consumers? Using indirect inference, we study the impulse responses to confidence innovations in conjunction with an appropriately augmented New Keynesian model. While news, animal spirits, and pure noise all contribute to confidence innovations, the relationship between confidence and subsequent activity is almost entirely reflective of the news component. Confidence innovations are well characterized as noisy measures of changes in expected productivity growth over a relatively long horizon.

Almost all recent research on macroeconomic fluctuations has worked with seasonally adjusted or annual data. This paper takes a different approach by treating seasonal fluctuations as worthy of study in their own right. Our results show that seasonal fluctuations are an important source of variation in all macroeconomic quantity variables but are small or entirely absent in both real and nominal price variables. The timing of the seasonal fluctuations consists of increases in the second and fourth quarters, a large decrease in the first quarter, and a mild decrease in the third quarter. The paper demonstrates that, with respect to each of several major stylized facts about business cycles, the seasonal cycle displays the same characteristics as the business cycle, in some cases even more dramatically than the business cycle. That is, we find that at seasonal frequencies as well as at business cycle frequencies, output movements across broadly defined sectors move together, the timing of production and the timing of sales coincide closely, labor productivity is procyclical, nominal money and real output are highly correlated, and prices vary less than quantities. There is a "seasonal business cycle" in the U.S. economy, and its characteristics closely mirror those of the conventional business cycle.

This paper contributes a new element to the explanation of the Gibson paradox, the puzzling correlation between interest rates and the price level seen during the gold standard period. A shock that raises the underlying real rate of return in the economy reduces the equilibrium relative price of gold and, with the nominal price of gold pegged by the authorities, must raise the price level. The mechanism involves the allocation of gold between monetary and nonmonetary uses. Our explanation helps to resolve some important anomalies in previous work and is supported by empirical evidence along a number of dimensions.

The inclusion of a durable goods sector in sticky-price models has strong and unexpected implications. Even if most prices are flexible, a small durable goods sector with sticky prices may be sufficient to make aggregate output react to monetary policy as though most prices were sticky. In contrast, flexibly priced durables with sufficiently long service lives can undo the implications of standard sticky price models. In a limiting case, flexibly priced durables cause monetary policy to have no effect on aggregate output. Our analysis suggests that durable goods prices are the most relevant data for calibrating price rigidity.