In this paper, the authors study the dynamic behavior of a menu-cost economy where firms are heterogeneous. In this contex t, they generalize the Caplin and Spulber (1987) monetary-neutrality result; show that uniqueness of equilibria depends on the degree of dispersion of firms' positions in...

This paper studies quarterly employment flows of approximately 10,000 U.S. manufacturing establishments. The authors use establishments' hours-week to construct measures of the deviation between desired and actual employment and use these as the establishments' main state variables. The main...

The basic premise of this paper is that understanding aggregate dynamics requires considering that agents are heterogeneous and that they do not adjust continuously to the shocks they perceive. The authors provide a general characterization of lumpy behavior at the microeconomic level in terms...

Most economies experience episodes of persistent real exchange rate appreciations, when the question arises whether there is a need for intervention to protect the export sector. This paper presents a model of irreversible destruction where exchange rate intervention may be justified if the...

In this paper we document first that, in contrast with their widely perceived excess returns, popular carry trade strategies yield low systemic-risk-adjusted returns. In particular, we show that carry trade returns are highly correlated with the return of a VIX rolldown strategy --i.e., the...

In this paper we provide a model of the macroeconomic consequences of a shortage of safe assets. In particular, we discuss the emergence of a deflationary safety trap equilibrium which is an acute form of a liquidity trap. In this context, issuing public debt, swapping private risky assets for...

In this paper we provide a model of the macroeconomic consequences of a shortage of safe assets. In particular, we discuss the emergence of a deflationary safety trap equilibrium which is an acute form of a liquidity trap. In this context, issuing public debt, swapping private risky assets for...

This paper argues that precautionary savings due to uninsurable earnings uncertainty are likely to be an important source of aggregate wealth accumulation. The stylized model presented in this paper can easily generate levels of wealth above 60 percent of the observed net wealth in the United...