The two leading explanations for the poor inflation performance during the 1970s are policy opportunism (Barro and Gordon 1983) and "inadvertently" bad monetary policy (Clarida, Gali, and Gertler 2000, Orphanides 2003). The main models of the latter category are that of Orphanides (loose...

We show that international trade in goods is the main determinant of international equity portfolios and it also offers a compelling - theoretically and empirically - resolution of the portfolio home bias puzzle. The model implies that investors can achieve full international risk...

We revisit the contribution of misperceived money to business cycles, and in particular to the inertial dynamics of inflation following a monetary policy shock. We establish three things. First, the difference between preliminary and revised money data captures monetary misperceptions well....

Imperfect information has played a prominent role in modern business cycle theory. We assess its importance by estimating the New Keynesian (NK) model under alternative informational assumptions. One version focuses on confusion between temporary and persistent disturbances. Another, on...

The Calvo scheme represents the standard specification of price resetting in the New Keynesian model. We show that using this rather than a fixed duration (Taylor) scheme matters importantly for the dynamics of the model as it allows it to generate hump-shaped response of output without an...

We revisit the contribution of misperceived money to business cycles, and in particular to the inertial dynamics of inflation following a monetary policy shock. We establish three things. First, the difference between preliminary and revised money data captures monetary misperceptions well....

Imperfect information has played a prominent role in modern business cycle theory. This paper assesses its importance by estimating the New Keynesian (NK) model under alternative informational assumptions. One version focuses on confusion between temporary and persistent disturbances. Another,...

We revisit the contribution of misperceived money to business cycles and, in particular, to the inertial dynamics of inflation following a monetary policy shock. We establish three things. First, the difference between preliminary and revised money data captures monetary misperceptions well....

We study the properties of alternative central bank targeting procedures in a general equilibrium, monetary model with labor contracts, endogenous velocity and three shocks: money demand, supply and fiscal. Money demand -velocity- shocks emerge as the main source of macroeconomic volatility....

We extend the benchmark RBC model amending the technology for efficiency wage considerations. The disutility of effort depends on current, alternative and past wages. Past wages are treated as the worker's past wages (personal norm case) or as the past wages of the society (social norm case)....