Economic Fluctuations and Growth.

• Position: Program and Working Group Meetings

NBER's Program on Economic Fluctuations and Growth met on October 17 at the Federal Reserve Bank of Chicago. Organizers Janice C. Eberly, NBER and Northwestern University, and Giuseppe Moscarini, NBER and Yale University, chose the following papers to discuss:

Robert B. Barsky, University of Michigan and NBER, and Eric Sims, University of Michigan, "Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence"

Critic: John H. Cochrane, University of Chicago and NBER

Emmanuel Farhi, Harvard University and NBER and Ivan Werning, MIT and NBER, "The Political Economy of Nonlinear Capital Taxation"

Critic: Narayana R. Kocherlakota, University of Minnesota and NBER

Charles I. Jones, University of California, Berkeley and NBER, "Intermediate Goods and Weak Links: A Theory of Economic Development"

Critic: Richard Rogerson, Arizona State University and NBER

Steven J. Davis, University of Chicago and NBER; R. Jason Faberman, Federal Reserve Bank of Philadelphia; John Haltiwanger, University of Maryland and NBER; and Ron Jarmin and Javier Miranda, U.S. Census Bureau, "Business Volatility, Job Destruction, and Unemployment"

Critic: Ruediger Bachmann, University of Michigan

Arvind Krishnamurtby and Annette Vissing-Jorgensen, Northwestern University and NBER, "The Aggregate Demand for Treasury Debt"

Critic: Henning Bohn, University of California, Santa Barbara

Michael Woodford, Columbia University and NBER, "Information-Constrained State-Dependent Pricing"

Critic: Ariel Burstein, University of California, Los Angeles and NBER

Innovations to measures of consumer confidence convey incremental information about economic activity far into the future. Barsky and Sims compare the shape of impulse responses to confidence innovations in the data with the predictions of a calibrated New Keynesian model. They find little evidence of a strong causal channel from autonomous movements in sentiment to economic outcomes (the "animal spirits" interpretation). Rather, these impulse responses support an alternative hypothesis: that the surprise movements in confidence reflect information about future economic prospects (the "information" view). The authors conclude that confidence innovations are best characterized as noisy measures of changes in expected productivity growth over a relatively long horizon.

Farhi and Werning study efficient nonlinear taxation of labor and capital in a dynamic Mirrleesian model incorporating political economy...