We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect … theory, the consumers' perceived utility losses from price increases are weighted more heavily than the perceived utility … an otherwise standard dynamic neoclassical model of monopolistic competition. The resulting theory of price adjustment is …

trade result in an asymmetric reaction to an otherwise symmetric shock. In this context, we show that oil price shocks can …

that the employment rate is slow to converge to its steady state value after a monetary shock. The after-effects of a shock … continue to exert an effect on the labor market even long after the shock is over. The sluggishness of the labor market … translates to the product market and thus the output effects of the monetary shock become more persistent. Under reasonable …

cycle model. In particular, we analyze the effect of a monetary policy shock and investigate how labor market frictions … persistent movements of aggregate inflation. Moreover, the impact of a monetary policy shock on unemployment and inflation …