We present a sticky-wage model with two types of labors: while worker's labor contributes to current production, researcher's work helps develop new ideas to add to firm's knowledge capital that enhances its productivity for many periods. The long-lived effect of knowledge capital on...

The search for new ideas by profit-seeking firms and knowledge spillovers are well-known and fundamental sources of modern economic growth. This paper examines the implications of idea production and knowledge capital for monetary business cycles. We construct a sticky-wage model where workers...

Previous studies have stressed that inflation dynamics exhibit a substantial dispersion across sectors. Using US producer price data, we present evidence that sectoral inflation persistence is negatively correlated with market concentration, which is difficult to reconcile with the prediction of...

Pecuniary externalities in models with financial friction justify macroprudential policies for preventing economic agents' excessive risk taking. We extend the Diamond and Rajan (2012) model of banks with the production factors and explore how a pecuniary externality affects a bank's leverage....