In this paper, we establish three new facts about price-setting by multi-product firms and contribute a model that can match our findings. On the empirical side, using micro-data on U.S. producer prices, we first show that firms selling more goods adjust their prices more frequently but on...

How might bounded rationality shape decisions to spend? A field experiment verifies a theory of bounded rationality as deliberation costs that can explain findings from previous experiments on pricing in developing countries. The model predicts that (1) eliminating deliberation costs will...

There has been much concern about inflation in China recently. The People’s Bank in the last few months has raised the reserve requirement several times to control the money supply to slow down inflation. In 1985 when I was organizing a summer workshop on macroeconomics in cooperation with the...

How rigid are producer prices? Conventional wisdom is that producer prices are more rigid than and so play less of an allocative role than do consumer prices. In the 1987-2008 micro data collected by the U.S. Bureau of Labor Statistics for the PPI, we find that producer prices for finished goods...

The severe world-wide recession of 2008-09 has focused attention on the role of asset-price bubbles in exacerbating economic instability in capitalist economies. The boom in house prices in the United States from 2000 through 2006 is a case in point. According to the Case-Shiller 20-city index,...

Modern business cycle theory involves developing models that explain stylized facts. For this strategy to be successful, these facts should be well established. In this paper, we focus on the stylized facts of international business cycles. We use the generalized method of moments and quarterly...

Multi-country models have not been very successful in replicating important features of the international transmission of business cycles. Standard models predict cross-country correlations of output and consumption which are respectively too low and too high. In this paper, we build a...

This paper studies a dynamic-optimizing model of a semi-small open economy with sticky nominal prices and wages. the model exhibits exchange rate overshooting in response to money supply shocks. the predicted variability of nominal and real exchange rates is roughly consistent with that of G7...

This paper studies the proposition that an inflation bias can arise in a setup where a central banker with asymmetric preferences targets the natural unemployment rate. Preferences are asymmetric in the sense that positive unemployment deviations from the natural rate are weighted more (or less)...