Is monetary policy less effective at increasing real output during periods of high volatility than during normal times …? In this paper, I argue that greater volatility leads to an increase in aggregate price flexibility so that nominal … stimulus mostly generates inflation rather than output growth. To do this, I construct price-setting models with "volatility …

What drives countercyclical volatility? A large literature has documented that many economic variables are more … volatility or responsiveness is getting bigger, and these two explanations have very different policy implications. However, we … volatility shocks cannot …