The standard argument for abstracting from capital accumulation in sticky-price macro models is based on their short-run focus: over this horizon, capital does not move much. This argument is more problematic in the context of real exchange rate (RER) dynamics, which are very persistent. In this...

While the asset price collapse of the late 80s in Japan might explain the disinflationary pressures that followed, it is hard to attribute the persistent deflation that the country has faced since the mid 90s to that initial shock. We argue that a failure to account for demographic trends when...

We develop a tractable unified framework for solving optimal time- and state-dependent price-setting problems. We illustrate our approach by solving a price-setting problem where adjustments are costly, and there are two types of information. One type is freely and continuously available while...

We use an identified factor-augmented vector autoregression (FAVAR) to estimate the impact of monetary policy shocks on the cross-section of stock returns. Our FAVAR combines unobserved factors extracted from a large set of financial and macroeconomic indicators with the Federal Funds rate. We...