This paper proposes a tractable New Keynesian (NK) economy with endogenous adjustment in product quality that nests the canonical framework. Endogenous quality choice reduces the slope of the traditional NK Phillips curve and amplifies the economy’s response to productivity shocks. This leads...

This paper studies from an empirical and theoretical perspective the systemic and bank-level effects of imposing reserve requirements (RR) in foreign currency in an economy with a heavily dollarized financial system. The paper empirically characterizes banks responses to the RR carried out by...

This paper studies the effect of capital controls on misallocation and welfare in an economy with financial constraints. We build a general equilibrium model with heterogeneous firms, financial constraints and international trade and calibrate it to the Chilean economy. Since high-productivity...