How does an economy's capital respond to aggregate productivity shocks when firms make lumpy investments? We show that capital's transitional dynamics are structurally linked to two steady‐state moments: the dispersion of capital to productivity ratios—an indicator of capital...

Common wisdom dictates that uncertainty impedes trade—we show that uncertainty can fuel more trade in a simple general equilibrium trade model with information frictions. In equilibrium, increases in uncertainty increase both the mean and the variance in returns to exporting implying that...

Nominal shocks have long lasting effects on real economic activity, beyond those implied by the average frequency of price adjustment in micro data. This paper develops a price-setting model that explains this gap through the interplay of menu costs and uncertainty about productivity....

In economies with lumpy microeconomic adjustment, we establish structural relationships between the dynamics of the cross-sectional distribution of agents and its steady-state counterpart and discipline these relationships using microdata. Applying our methodology to firm lumpy investment, we...

We survey work using Bayesian learning in macroeconomics, highlighting common themes and new directions. First, we present many of the common types of learning problems agents face---signal extraction problems---and trace out their effects on macro aggregates, in different strategic settings....