Sticky price models featuring heterogeneous firms and systematic firm-level productivity trends deliver radically different predictions for the optimal inflation rate than their popular homogenous-firm counterparts: (1) the optimal steady-state inflation rate generically differs from zero and...

When Bayesian risk-averse investors are uncertain about their assets' cash flows' exposure to systematic risk, stock prices react more to news in downturns than in upturns, implying higher volatility in downturns and negatively skewed returns. The reason is that, in good times, less desirable...

Monetary policy shocks have a large impact on aggregate stock market returns in narrow event windows around press releases by the Federal Open Market Committee. We use spatial autoregressions to decompose the overall effect of monetary policy shocks into a direct (demand) effect and an indirect...

The optimal mix of growth policies is determined within a comprehensive endogenous growth model. The analysis captures important elements of the tax-transfer system and accounts for transitional dynamics. Currently, for calculating corporate taxable income US firms are allowed to deduct...

Assets in the fossil fuel industries are at risk of losing market value due to anticipated breakthroughs in renewable technology and governments stepping up climate policies in the light of the Paris commitments to limit global warming to 1.5 or 2 degrees Celsius. Stranded assets arise due to...

How do short and long term interest rates respond to a jump in financial uncertainty? We address this question by conducting a local projections analysis with US monthly data, period: 1962-2018. The state-of-the-art financial uncertainty measure proposed by Ludvigson, Ma, and Ng (2019) is found...

How much does inequality matter for the business cycle and vice versa? Using a Bayesian likelihood approach, we estimate a heterogeneous-agent New-Keynesian (HANK) model with incomplete markets and portfolio choice between liquid and illiquid assets. The model enlarges the set of shocks and...

We examine partisan bias in inflation expectations. Our dataset includes inflation expectations of the New York Fed's Survey of Consumer Expectations over the period June 2013 to June 2018. The results show that inflation expectations were 0.46 percentage points higher in Republican-dominated...