This paper analyzes the optimal adjustment strategy of an inventory-holding firm facing price- and quantity-adjustment costs in an inflationary environment. The model nests both the original menu-cost model that allows production to be costlessly adjusted, and the later model that includes...

Banks have always played an ambivalent role in financial markets. On the one hand, they provide essential services for the market; on the other hand, problems in the banking sector can send shock waves through the entire economy. Given this prominent role, it is not surprising that Pereira and...

We develop a financial-economic model for carbon pricing with an explicit representation of decision making under risk and uncertainty that is consistent with the Intergovernmental Panel on Climate Change's sixth assessment report. We find that this approach provides economic support for the...

We study climate change in a model with a carbon-intensive and a green sector, each subject to stochastic sectoral productivity shocks, and show how the underlying economic structure affects the risk-adjusted discount rate and the climate risk premium in the social cost of carbon (SCC)....

We examine asset prices in a representative-agent model of general equilibrium. Assuming only that individuals are risk averse, we determine conditions on the changes in asset risk that are both necessary and sufficient for the asset price to fall. We show that these conditions neither imply,...

In this paper, we construct alternative theoretical models for exchange rates by introducing additional risk factors, based on the volatility of macroeconomic fundamentals. The modified flexible-price monetary model is used to characterize the long-run equilibrium of exchange rates, while the...