Romer's early research made him one of the leaders of the
New Keynesian economics. Specifically, an influential paper with
Laurence M. Ball, published in 1989, established that real rigidities (that is, stickiness in relative prices) can exacerbate nominal rigidities (that is, stickiness in nominal prices). Romer's most widely cited paper is "A Contribution to the Empirics of Economic Growth," coauthored with
Gregory Mankiw and
David N. Weil and published in the
Quarterly Journal of Economics in 1992. The paper argues that the
Solow growth model, once augmented to include a role for human capital, does a reasonably good job of explaining international differences in standards of living. According to
Google Scholar, it has been cited more than 25,000 times, making it one of the most cited articles in the field of economics. In more recent work, Romer has worked with Christina Romer on fiscal and
monetary policy from the 1950s to the present, using notes from the meetings of the
Federal Open Market Committee (FOMC) and the materials prepared by Fed staff to study how the
Federal Reserve makes its decisions. His work suggests that some of the credit for the relatively stable economic growth in the 1950s should lie with good policy made by the Federal Reserve, and that the members of the FOMC could at times have made better decisions by relying more closely on forecasts made by the Fed professional staff. Most recently, the Romers have focused on the impact of tax policy on government and general economic growth. This work looks at the historical record of US tax changes from 1945–2007, excluding "endogenous" tax changes made to fight recessions or offset the cost of new government spending. It finds that such "exogenous" tax increases, made for example to reduce inherited budget deficits, reduce economic growth (though by smaller amounts after 1980 than before). Romer and Romer also find "no support for the hypothesis that tax cuts restrain government spending; indeed ... tax cuts may increase spending. The results also indicate that the main effect of tax cuts on the government budget is to induce subsequent legislated tax increases." Romer has also written papers on some unusual subjects for a macroeconomist, such as “Do Students Go to Class? Should They?”, and “Do Firms Maximize? Evidence from Professional Football.” ==Career==