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 …

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 …

financial institutions in the transmission of credit and technology shocks to the real economy. A positive credit shock, defined … between loan and deposit rates. The effects of the credit shock tend to be highly persistent even without price rigidities and …

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