We provide evidence on the transmission of monetary policy shocks in a setting with both economic and financial variables. We first show that shocks identified using high frequency surprises around policy announcements as external instruments produce responses in output and inflation that are...

In menu cost models, real effects of aggregate nominal shocks are sensitive to unobserved characteristics of price setting. The standard way to calibrate key pricing parameters is to match the cross-sectional distribution of price changes. We argue that this unconditional distribution contains...

We introduce long-term government bonds along with private credit instruments into a monetary DSGE model with financial intermediaries that face endogenously determined balance sheet constraints. We use it to compare the effects of large-scale purchases of private and government assets after a...

We propose a simple spatial model to explain why the price level is higher in rich countries. There are two sectors: manufacturing, which is freely tradable, and non-tradable services, which have to locate near customers in big cities. As countries develop, total factor productivity increases...

evidence on the asymmetry of inflation response to aggregate shocks. We show that even though a standard menu cost model like that of Golosov and Lucas (2007) underestimates the asymmetry, a sectoral menu cost model with multi-product firms and trend-inflation can quantitatively account for the...

Real effects of monetary policy shocks in menu cost models depend crucially on the distribution of the size of price changes. With a realistically high kurtosis, Midrigan (2011) overturned the standard Golosov and Lucas (2007) result of small and temporary real effects and found them nearly as...

We provide evidence on the nature of the monetary policy transmission mechanism. To identify policy shocks in a setting with both economic and financial variables, we combine traditional monetary vector autoregression (VAR) analysis with high frequency identification (HFI) of monetary policy...

How do frictions in price setting influence monetary non-neutrality? We revisit this classic question in a quantitative menu cost model with multi-product firms that face idiosyncratic shocks with unsynchronized stochastic volatility. The model matches the unconditional distribution of price...

We provide evidence on the nature of the monetary transmission mechanism. To identify policy shocks in a setting with both economic and financial variables, we combine traditional monetary vector autoregression (VAR) analysis with high frequency identification (HFI) of monetary policy shocks. We...