This paper presents a general equilibrium currency crisis model of the "third generation", in which the possibility of currency crises is driven by the interplay between private firms' credit-constraints and nominal price rigidities. Despite our emphasis on microfoundations, the model remains...

Sticky-price models with rational expectations fail to capture the inertia in US inflation Models with backward-looking expectations capture current inflation behavior but are unlikely to fit other monetary regimes This paper seeks to overcome these problems with a near-rational model of...

In standard New Keynesian models, the size of the output expansion generated by aggregate demand shocks depends crucially on the elasticity of labor supply which is empirically quite small. In principle, this link can be broken in a multisectoral economy with differing degrees of price...

A major criticism against staggered nominal contracts is that they give rise to the so called "persistency puzzle" - although they generate price inertia, they cannot account for the stylised fact of inflation persistence. It is thus commonly asserted that, in the context of the new Phillips...

This paper presents and estimates a sticky-price model with heterogenous households and financial frictions. Frictions in state-contingent asset markets lead to imperfect risksharing among households with idiosyncratic labor incomes. I study the impacts of the introduced financial frictions on...

This paper introduces heterogeneous households into an otherwise standard sticky-price model with industry-specific labor markets. Households differ in labor incomes and asset markets are incomplete. I show that household heterogeneity affects equilibrium dynamics nontrivially by amplifying...

We take an agnostic view of the Phillips curve debate, and carry out an empirical investigation of the relative and absolute efficacy of Calvo sticky price (SP), sticky information (SI), and sticky price with indexation models (SPI), with emphasis on their ability to mimic inflationary dynamics....

This paper studies optimal fiscal and monetary policy under sticky product prices. The theoretical framework is a stochastic production economy without capital. The government finances an exogenous stream of purchases by levying distortionary income taxes, printing money, and issuing one-period...

The objective of this paper is to provide an optimizing model of wage and price setting consistent with U.S. data. The paper first investigates the predictions of an optimizing labor supply model for the aggregate nominal wage, taking as given the evolution of prices and quantities. In this part...

This paper investigates the predictions of a simple optimizing model of nominal price rigidity for the dynamics of inflation. Taking as given the paths of nominal labor compensation and labor productivity to approximate the evolution of marginal costs, I determine the path of prices predicted by...