We provide a tractable model to study monetary policy under discretion. We restrict our analysis to Markov equilibria. We find that for all parametrizations with an equilibrium inflation rate of about 2 percent, there is a second equilibrium with an inflation rate just above 10 percent. Thus,...

Lack of commitment in monetary policy leads to the well known Barro-Gordon inflation bias. In this paper, we argue that two phenomena associated with the time inconsistency problem have been overlooked in the exchange rate debate. We show that, absent commitment, independent monetary policy can...

Exporters are few-less than one-fifth among U.S. manufacturing firms-and are larger than non-exporting firms-about 4-5 times more total sales per firm. These facts are often cited as support for models with economies of scale and firm heterogeneity as in Melitz (2003). The authors find that the...