We study the interplay of inequality and trust in a dynamic game, in which trust increases efficiency and thus allows higher growth of the experimental economy in the future. We find that trust is initially high in a treatment starting with equal endowments, but decreases over time. In a...

This study investigates whether exchange rate flexibility aids real exchange rate adjustment based on intra-period data on dual exchange rates from developing countries. Specifically, it analyzes whether the flexible parallel market rate produces faster or slower real exchange rate adjustment...

This paper explores whether the cost channel solves the price puzzle. We set-up a New Keynesian DSGE model and estimate it for the euro area by adopting a minimum distance approach. Our findings suggest that - under certain parameter restrictions which are not rejected by the data - the cost...

This paper considers the problem of aggregation in the case of large linear dynamic panels, where each micro unit is potentially related to all other micro units, and where micro innovations are allowed to be cross sectionally dependent. Following Pesaran (2003), an optimal aggregate function is...

Using firm-level survey data from Germany, this paper asks how do supply constraints propagate monetary policy shocks? To answer this question, we first offer a general discussion on the measurement of supply constraints. We show that capacity utilization, a widely accepted measure of...

We apply and extend the cost-based approach to bundling and tying under competition developed in Evans and Salinger (2004) to over-the-counter pain relievers and cold medicines. We document that consumers pay much less for tablets with multiple ingredients than they would if they bought tablets...

We derive exact conditions relating the distributions of firm productivity, sales, output, and markups to the form of demand in monopolistic competition. Applications include a new “CREMR” demand function (Constant Revenue Elasticity of Marginal Revenue): it is necessary and sufficient for...

This paper presents a simple model of state-dependent pricing that allows identification of the relative importance of the degree of price rigidity that is inherent to the price setting mechanism (intrinsic) and that which is due to the price's driving variables (extrinsic). Using two data sets...

We set up a model to characterize the reaction functions of governments competing for mobile capital by simultaneously setting both the business tax rate as well as the level of provision of a productive public input. Using a rich data set of local jurisdictions, we then test the predictions of...

This paper uses the European Commission's Consumer Survey to assess whether inflation expectations have converged and whether inflation uncertainty has diminished following the introduction of the Euro in Europe. Consumers? responses to the survey suggest that inflation expectations depend more...