At the aggregate level, the evidence that deviations from purchasing power parity (PPP) are too persistent to be explained solely by nominal rigidities has long been a puzzle (Rogoff, 1996). Another puzzle from the micro price evidence of the law of one price (LOP), which is the basic building...

We extend the Cole and Obstfeld model in a number of directions to more accurately assess the terms of trade channel. Two crucial theoretical extensions are: to allow multiple producers of each primary commodity and to allow for incomplete specialization.We find that the negative correlation...

The beginning of the twentieth century provides a unique opportunity to explore the interaction of rapid technological progress and trade barriers in shaping the worldwide diffusion of a new, highly traded good: the automobile. We scrape historical data on the quantity and value of passenger...

One of the statements of purpose of the American Recovery and Reinvestment Act (ARRA) was “to assist those most impacted by the recession.” To consider this facet, the ARRA is assessed along this dimension using the concept of risk-sharing. We estimate a trend-stationary autoregressive model...

In this paper, we argue that differences in the cost structure across sectors play an important role in the decision of firms to adjust their prices. We develop a menu-cost model of pricing in which retail firms intermediate trade between producers and consumers. An important facet of our...

Economic research into the causes of business cycles in small open economies is almost always undertaken using a partial equilibrium model. This approach is characterized by two key assumptions. The first is that the world interest rate is unaffected by economic developments in the small open...

State and local governments throughout the United States attempted to mitigate the spread of Covid-19 using stay-at-home orders to limit social interactions and mobility. We study the economic impact of these orders and their optimal implementation in a fiscal union. Using an event study...

The current account in developed countries is highly persistent and volatile in comparison to their output growth. The standard intertemporal current account model with rational expectations (RE) fails to explain the observed current account and consumption dynamics. The RE model extended with...

Coibion and Gorodnichenko (2015) provide a useful framework to test the null hypothesis of full-information rational expectations against two popular classes of information rigidities, sticky information (SI) and noisy information (NI). However, the observational equivalence of SI and NI in...

We estimate a small-scale nonlinear DSGE model with the zero lower bound (ZLB) of the nominal interest rate for Japan, where the ZLB has constrained the country's monetary policy for a considerably long period. We employ the time iteration with linear interpolation method to solve equilibrium...