We present a sticky-price model incorporating heterogeneous firms and systematic firm-level productivity trends. Aggregating the model in closed form, we show that it delivers radically different predictions for the optimal inflation rate than canonical sticky price models featuring homogenous...

The failure to predict the surge in inflation in 2021 raises questions about whether we are better equipped to anticipate a future decline in inflation. What tools do we intend to use for predicting the trajectory of inflation? Are we still primarily relying on survey data regarding inflation...

Price setting has become more flexible following a string of large adverse shocks (Covid-19, the Ukraine War). We argue that a shift to a high-uncertainty regime incentivizes firms to invest in their ability to adjust prices. We formalize this idea in a general equilibrium model with endogenous...

Using a standard cheating game, we investigate whether the request to sign a no-cheating declaration affects truth-telling. Our design varies the content of a no-cheating declaration (reference to ethical behavior vs. reference to possible sanctions) and the type of experiment (online vs....

We build a two-country version of the model in Gali & Monacelli (2005), which extends for a small open economy the new Keynesain DSGE model used as tool for monetary policy analysis in closed economies. A distinctive feature of the model is that the terms of trade enters directly into the new...