A collection of "puzzles" in macroeconomics
This repo is collects puzzling evidence and open questions concering macroeconomic research. It aims to be a compilation of the contradictions between economic theory and the empirical evidence. Hopefully it will help us all (and motivated junior researchers) to focus on the importan questions and the big picture, and not to get lost in (technical) details. As such it has some similarity to the list of Hilbert's Problems.
Definition of a puzzle in this context:
A puzzle is a contradiction between theoretical conjectures and empirical evidence
This list is tought to be constructive and not intended to be a one-sided critique on macroeconomics/DSGE models/rational Expectations as a whole. Please try to be concise and neutral. Put details like literature or links to potential solutions in separate files and not in the list directly.
A non-exhaustive list
- The Price Puzzle: in many studies, the Fed Fund rate is positively correlated with inflation (Bernanke and Blinder, 1992, AER)
- The Equity Premium Puzzle: Macro models require an implausibly high degree of risk aversion to explain the premium of stocks over "safe" bonds (Mehra and Prescott, 1985, JME)
- The bond premium puzzle: macro models cannot explain the large and variable premium on long-term vs short-term bonds (Rudebush and Swanson, 2008, JME)
- The Shimer puzzle: basic search-and-matching models cannot explain the volatility in unemployment given the observed volatilty in labor productivity (Shimer, 2005, AER)
- The Forward Guidance Puzzle: standard DSGE models tend to grossly overestimate the impact of Forward Guidance on the macroeconomy (Del Negro, Giannoni and Patterson, 2015, FED NY Working Paper)
- The Flat Phillips Curve: when estimated with flat priors, the coefficient of the NK-PC will be very close to zero
- The Monetary Transmission puzzle: intertemporal substitution is a too simplistic view on the monetary transmission mechanism
- The Rational Expectations Puzzle: survey evidence contradicts the rational expectations hypothesis