Was the high inflation of the 1970s mostly due to incomplete information about the structure of the economy (an unavoidable mistake as suggested by Orphanides, 2000)? Or, to weak reaction to expected inflation and/or excessive policy activism that led to indeterminacies (a policy mistake, a...

Was the high inflation of the 1970s mostly due to incomplete information about the structure of the economy (an unavoidable mistake as suggested by Orphanides, 2000)? Or, to weak reaction to expected inflation and/or excessive policy activism that led to indeterminacies (a policy mistake, a...

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

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....