We study a model where households make decisions according to a dual process framework widely used in cognitive psychology. System 1 uses effortless heuristics but is susceptible to biases and errors. System 2 uses mental effort to make more accurate decisions. Through their pricing behavior,...

Motivated by the surge in debt levels through the pandemic crisis, we revisit the issue of the optimal financing of public debt. In contrast with the existing literature, we find that the optimal response of inflation to a large increase in debt levels is a gradual but significant and...