The world recently experienced several rare events with disastrous consequences: the global financial crisis, the European sovereign debt crisis, and the Fukushima nuclear accident. These events have in common that key decision-makers were unprepared for them, which aggravated these events. We...

Climate change and the public policies to arrest it are and will continue reshaping the global economy. This Discussion Paper draws on economic research to identify some key medium- and long-run economic implications of these developments. It explores implications for growth, innovation,...

This paper presents a model in which price setting firms decide what to pay attention to, subject to a constraint on information flow. When idiosyncratic conditions are more variable or more important than aggregate conditions, firms pay more attention to idiosyncratic conditions than to...

We develop a dynamic stochastic general equilibrium model with rational inattention by households and firms. Consumption responds slowly to interest rate changes because households decide to pay little attention to the real interest rate. Prices respond quickly to some shocks and slowly to other...

We review the recent literature that studies new, detailed micro data on prices. We discuss implications of the new micro data for macro models. We argue that the new micro data are helpful for macro models, but not decisive. There is no simple mapping from the frequency of price changes in...

A researcher is interested in a set of variables that he wants to model with a vector auto-regression and he has a dataset with more variables. Which variables from the dataset to include in the VAR, in addition to the variables of interest? This question arises in many applications of VARs, in...