Employing a vignette experiment, we test the empirical importance of key attitudes underlying the models of taste-based and statistical discrimination in explaining ethnic hiring discrimination. We find that employer concern that co-workers and customers prefer collaborating with natives drives...

This paper examines the Turkish wage curve using individual data from the Household Labor Force Survey including 26 NUTS-2 regions over the period 2005–2008. We find an unemployment elasticity of −0.099, with a higher elasticity for younger, less educated, less experienced and female workers.

We consider a dual labor market with a frictional formal sector and a competitive informal sector. We show that the size of the informal sector is generally too large compared to the optimal allocation of the workers. It follows that our results give a rationale to informality-reducing policies.

We test the predictions of the sticky information model using a survey dataset by comparing shoppers’ accuracy in recalling the prices of regulated and comparable unregulated products. Because regulated product prices are capped, they are sold more than comparable unregulated products, while...

We use micro level retail price data from convenience stores to study the link between 0-ending price points and price rigidity during a period of a runaway inflation, when the annual inflation rate was in the range of 60%–430%. Surprisingly, we find that more round prices are less likely to...

In this paper, we consider a model where producers set their prices based on their prediction of the aggregated price level and an exogenous variable, which can be a demand or a cost-push shock. To form their expectations, they use OLS-type econometric learning with bounded memory. We show that...

If long-term inflation expectations are well-anchored, they should be unaffected by short-term economic news. This letter introduces news-regressions with multiple endogenous breaks to investigate the de- and re-anchoring of US inflation expectations. We confirm earlier evidence on the...

This paper examines the role of habit formation in a standard state-dependent pricing (SDP) model. Incorporating habit formation helps the SDP model to generate hump-shaped and more persistent output responses under a monetary shock. More importantly, incorporating habit formation causes...

We investigate the role of sticky wages in accounting for real exchange rate dynamics. Unlike the sticky price economy, government spending shocks play a more important role than technology shocks in explaining the hump-shaped impulse responses of real exchange rates.

Central banks face uncertainty about potential output. We model optimal monetary policy under discretion in a situation in which the central bank adopts a min–max approach to policy. The case for appointing a conservative central banker who puts a larger weight on inflation stabilization...