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Macro Puzzles

A collection of "puzzles" in macroeconomics

This repository collects puzzling evidence and open questions in 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 important questions and the big picture. 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

You are much invited to add puzzles. This list is thought to be constructive and not intended to be a one-sided critique on macroeconomics/DSGE models/rational Expectations/parapsychic mind control as a whole. Please be neutral and concise. The GitHub issues can be used for discussion.

To contribute, just edit this file on GitHub or shoot me an email. Here is a short guide as well. .


A non-exhaustive list

Monetary Economics

  • The Neo-Fisherian Puzzle: With simple model tweaks, low interest rates are disinflationary. (Schmitt-Grohé and Uribe, 2017, AER)
  • The Natural Rate Puzzle: The natural rate of interest seems to be steadily declining for at least the last two decades. (Laubach and Williams, 2016, Business Economics)
  • The Forward Guidance Puzzle: An expected monetary policy shock in the far future has the same impact as the same shock in the current period. (Del Negro, Giannoni and Patterson, 2015, FED NY Working Paper)
  • The Flat Phillips Curve Puzzle: Estimates of the coefficient of the NK-PC and regression coefficients of inflation on unemployment are very close to zero (equivalent to the missing deflation/inflation puzzle). (e.g. Ball and Mazumder, 2011, NBER Working Paper)
  • The Monetary Transmission Puzzle: Intertemporal substitution is a too simplistic view on the monetary transmission mechanism. (e.g. Jappelli and Pistaferri, 2010, Annual Review of Economics)
  • The Inflation Persistence Puzzle: Staggered nominal contracts generate price persistence, but fail to account for inflation persistence. (Fuhrer and Moore, QJE, 1995)
  • The Liquidity Puzzle: The failure of identified monetary policy disturbances to create negative short-run correlations between nominal interest rates and the money stock. (Mishkin, JoF, 1981)

Economics of Inequality

  • The Rising Markup Puzzle: Markups on marginal costs and hence the profit share is increasing. (e.g. Hall, 2018 NBER Working Paper)
  • The Fast-Transition Puzzle: Current models do not do well in explaining the rapid rise in wealth concentration since the 1980s. (Gabaix, Lions and Moll, 2016, Econometrica)


  • The Credit Spread Puzzle: Structural models of default calibrated to historical default rates, recovery rates, and Sharpe ratios typically generate Baa–Aaa credit spreads that are significantly below historical values. (Chen, Collin-Dufresne, and Goldstein, 2009, RFS)
  • 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 Declining Savings Puzzle: The U.S. personal saving rate declined from 11 percent to 3 percent between 1980 and 2007. (Guidolin and Jeunesse, 2007 St. Louis Fed Review)
  • The Price Puzzle: In many studies, the Fed Fund rate is positively correlated with inflation. (Bernanke and Blinder, 1992, AER)
  • The Risk-Free Rate Puzzle: Why is the risk-free rate so low if agents are so averse to intertemporal substitution? -- Related to the Equity Premium Puzzle above. (Weil, 1989, JME)
  • 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 Equity Volatility Puzzle: Why is the volatility of stock returns so high (in relation to the short-term real interest rate)? (Campbell, 2003, The American Economist; Shiller, 1981, AER)

International Macro

  • The International Elasticity Puzzle: The elasticity between foreign and domestic goods necessary to match fluctuations in trade balances, and the elasticity needed to account for trade growth patterns are hard to reconcile. (Ruhl, 2008, unpublished manuscript)
  • The International Diversification Puzzle: Although international financial markets are highly integrated across the more well-developed countries, investors nevertheless hold portfolios that consist nearly exclusively of domestic assets. (Baxter and Jermann, 1997, AER)

Labor & Wages

  • Productivity Puzzle: Labor productivity growth in major advanced economies has markedly slowed since the Great Recession, particularly in the UK. (Tenreyro, 2018, BoE spreech)
  • The Falling Labor Share Puzzle: While classically assumed to be constant, the labor share is falling since the 1980s. (Karabarbounis and Neiman, 2014, QJE)
  • 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 Minimum Wage Puzzle: Portuguese data suggests that increasing minimum wages can lead to a decline of the worker-firms separation rate. (Portugal and Cardoso, 2006, JEEA)

Public Finance

  • The U.S. Pulic Debt Valuation Puzzle: The market value of outstanding U.S. government debt in the exceeds the expected present discounted value of current and future primary surpluses by a multiple of U.S. GDP. (Jiang et al, 2019, NBER WP 26583)
  • The Fiscal Price Puzzle: VAR evidence suggests that inflation tends to decline when government spending increases. (Jørgensen and Ravn, 2019, unpublished manuscript)

Behavioral Macro

  • The Rational Expectations Puzzle: Survey evidence contradicts the rational expectations hypothesis. (Greenwood and Shleifer, 2014, ReStud)

See here on how to add an item to the list, and admire the list of contributors.