"In this paper I argue that the current core of macroeconomics-by which I mainly mean the so-called dynamic stochastic general equilibrium approach-has become so mesmerized with its own internal logic that it has begun to confuse the precision it has achieved about its own world with the...

What is the relation between infrequent price adjustment and the dynamic response of the aggregate price level to monetary shocks? The answer to this question ranges from a one-to-one-link (Calvo, 1983) to no connection whatsoever (Caplin and Spulber, 1987). The purpose of this paper is to...