"When monetary policies are endogenous, the conventional VAR approach for detecting the effect of monetary policies is powerless. This paper proposes to test the implication of monetary policies along a different dimension. That implication is to exploit the policy induced exogeneity of...

"Price rigidity is the key mechanism for propagating business cycles in traditional Keynesian theory. Yet the New Keynesian literature has failed to show that sticky prices by themselves can effectively propagate business cycles in general equilibrium. We show that price rigidity in fact can (by...

"We analyze optimal monetary policy in an endogenous sticky price model. Similar models with exogenous sticky prices can deliver multiplicity of equilibria. Multiplicity of equilibria is a necessary condition for expectation traps to explain the variation across time and countries of inflation...

"A major criticism of standard specifications of price adjustment in models for monetary policy analysis is that they violate the natural rate hypothesis by allowing output to differ from potential in steady state. In this paper we estimate a dynamic optimizing business cycle model whose...

"The paper documents a new empirical result that a high level of aggregate U.S. idiosyncratic stock return volatility is usually associated with a future appreciation in U.S. dollars. The relation is highly significant for most foreign currencies. For example, idiosyncratic volatility accounts...