Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

If I could, Mr. Chairman, in the dynamic stochastic general equilibrium models, one of which I understand has been adopted by the staff for use in forecasting, employment fluctuates with shocks to productivity, and it’s the natural correspondent to that. So in some sense the unemployment rate rises because the natural rate rises, but that’s a way of saying that the natural rate goes up in recessions. I’m not sure if proponents of the natural rate view that as consistent with that old model, but that’s what happens in these models.

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