frictions (monitoring or auditing costs) increase, the reaction of stock prices to monetary policy shocks decreases …. Correspondingly, towards the end of the Enron accounting scandal, the stock prices of firms sharing the same auditor as Enron …

We show that the impact of supply and monetary policy shocks on consumer prices is state-dependent. First, we let the … exhibit a more substantial and more persistent effect on downstream prices during periods of elevated inflation volatility … effective in State 2. Exogenously differentiating regimes by the level of inflation or the shock size does not reveal state …