provided excellent research assistance. We thank our discussant Serguei Maliar, the editors John Taylor and Harald Uhlig, John Cochrane, and the participants at the Handbook Conference hosted by the Hoover Institution for helpful comments and suggestions. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.