Economic Fluctuations and Growth.

• Position: Bureau News - List of papers discussed at the February 7, 2003 National Bureau of Economic Research meeting

The NBER's Program on Economic Fluctuations and Growth met in San Francisco on February 7. Fernando Alvarez, NBER and University of Chicago, and Robert King, NBER and Boston University, organized this program:

Andrew Ang, NBER and Columbia University; Monika Piazzesi, NBER and University of California, Los Angeles; and Min Wei, Columbia University, "What does the Yield Curve Tell us about GDP Growth?"

Discussant: Urban Jermann, NBER and University of Pennsylvania

Susan Athey, NBER and Stanford University; Andrew Atkeson, NBER and University of California, Los Angeles; and Patrick J. Kehoe, Federal Reserve Bank of Minneapolis, "The Optimal Degree of Discretion in Monetary Policy" Discussant: Lawrence Christiano, NBER and Northwestern University

Boyan Jovanovic, NBER and New York University, and Peter L. Rousseau, NBER and Vanderbilt University, "Mergers as Reallocation" (NBER Working Paper No. 9279) Discussant: Andrew Atkeson

Marcelo Veracierto, Federal Reserve Bank of Chicago, "On the Cyclical Behavior of Employment, Unemployment and Labor Force Participation"

Discussant: Robert E. Hall, NBER and Stanford University

Yongsung Chang, University of Pennsylvania, and Sun-Bin Kim, Concordia University, "From Individual to Aggregate Labor Supply: A Quantitative Analysis Based on a Heterogeneous Agent Macroeconomy"

Discussant: Thomas E. MaCurdy, NBER and Stanford University

Aubhik Khan, Federal Reserve Bank of Philadelphia, and Julia K. Thomas, University of Minnesota, "Inventories and the Business Cycle: An Equilibrium Analysis of (S,s) Policies"

Discussant: Valerie A. Ramey, NBER and University of California, San Diego.

Ang, Piazzesi, and Wei build a dynamic model for GDP growth and yields that completely characterizes expectations of GDP. The model does not permit arbitrage. Contrary to previous studies, this paper concludes that the short rate has more predictive power than any term spread. The authors confirm this finding by forecasting GDP out-of-sample. The model also recommends the use of lagged GDP and the longest maturity yield to measure slope. Greater efficiency enables the yield-curve model to produce superior out-of-sample GDP forecasts than unconstrained ordinary least squares at all horizons.

Athey, Atkeson, and Kehoe analyze monetary policy design in an economy with an agreed-upon social welfare function that depends on the randomly fluctuating state of the economy. The monetary authority has private information about that state...