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A collection of "puzzles" in macroeconomics

This repo 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

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. If you want, you can add details like literature or links to potential solutions in a separate file.

A non-exhaustive list

Montary 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: The coefficient of the NK-PC as well as regression coefficients of inflation on unemployment will be very close to zero. (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)


  • 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 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)
  • 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)


  • The Rational Expectations Puzzle: Survey evidence contradicts the rational expectations hypothesis. (Greenwood and Shleifer, 2014, ReStud)
  • The Shimer Puzzle: Basic search-and-matching models cannot explain the volatility in unemployment given the observed volatilty in labor productivity. (Shimer, 2005, AER)

See here on how to add an item to the list, and have a look at (and admire) the list of contributors.

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