We develop an asset-pricing model with endogenous corporate policies that explains how inflation jointly impacts real asset prices and corporate default risk. Our model includes two empirically grounded nominal frictions: fixed nominal coupons and sticky profitability. Taken together, these two...

We use a large-scale representative survey of households from October 19-21 that elicits respondents’ expectations about the presidential election’s outcome as well as their economic expectations to document several new facts. First, people disagreed strongly about the likely outcome of the...

Rising government debt levels around the world are raising the specter that authorities might seek to inflate away the debt. In theoretical settings where fiscal policy “dominates” monetary policy, higher debt without offsetting changes in primary surpluses should lead households to...

We develop a capital structure model in which firms feature differential flexibility in adjusting output prices to shocks. Inflexible-price firms have lower profits and higher cash-flow volatility, leading in equilibrium to lower financial leverage, shorter debt duration, higher cost of debt,...

We exploit the unexpected announcement of an immediate, temporary VAT cut in Germany in the second half of 2020 as a natural experiment to study the spending response to unconventional fiscal policy. We use survey and scanner data on households’ consumption expenditures and their perceived...

The slope factor is constructed from changes in federal funds futures of different horizons and predicts stock returns at the weekly frequency: faster policy easing positively predicts returns. It contains information about the speed of future monetary policy tightening and loosening, and...

In a representative sample of new borrowers, access to lines of credit increases the spending of more liquid households permanently. Liquid consumers reduce their existing savings but do not tap into negative deposits, and hence do not raise debt. Through our FinTech bank setting, we elicit...

We show that, when forming expectations about aggregate inflation, consumers rely on the prices of goods in their personal grocery bundles. Our analysis uses novel representative micro data that uniquely match individual expectations, detailed information about consumption bundles, and...

With a binding effective lower bound on interest rates and large government deficits, conventional policies are unviable and policymakers resort to unconventional policies, which target households' expectations directly. Using unique micro data and a difference-in-differences strategy, we assess...

We document a large return drift around monetary policy announcements by the Federal Open Market Committee. Stock returns start drifting up 25 days before expansionary monetary policy surprises, whereas they decrease before contractionary surprises. The cumulative return difference across...