Factor models of disaggregate inflation indices suggest that sectoral shocks generate the bulk of sectoral inflation variance, but no persistence. Aggregate shocks, by contrast, are the root of sectoral inflation persistence, but have negligible relative variance. We show that simple factor...

We analyze financial risk premiums and real economic dynamics in a DSGE model with three types of agents - shareholders, bondholders and workers - that differ in participation in the capital market and in attitude towards risk and intertemporal substitution. Aggregate productivity and...

We propose to incorporate cross-sectional heterogeneity into structural VARs. Heterogeneity provides an additional dimension along which one can identify structural shocks and perform hypothesis tests. We provide an application to bank runs, based on microeconomic deposit market data. We impose...

Fiscal theorists warn about the risk of future inflation as a consequence of current fiscal imbalances in the US. Because actual inflation remains historically low and data on inflation expectations do not corroborate such risks, warnings for fiscal inflation are often ignored in policy and...

Increasingly many central banks announce likely paths for future policy rates. Recent experience suggest that market forward rates can differ substantially from those announced. Models commonly adopted in policy analysis ignore such differences. This paper studies a simple model that can capture...

Macroeconomic research often relies on structural vector autoregressions to uncover empirical regularities. Critics argue the method goes awry due to lag truncation: short lag-lengths imply a poor approximation to DSGE-models. Empirically, short lag-length is deemed necessary as increased...

We propose a monetary model in which the unemployed satisfy the official US definition of unemployment: they are people without jobs who are (i) currently making concrete efforts to find work and (ii) willing and able to work. In addition, our model has the property that people searching for...

We develop a model of investment with financial constraints and use it to investigate the relation between investment and Tobin's q. A firm is financed partly by insiders, who control its assets, and partly by outside investors. When their wealth is scarce, insiders earn a rate of return higher...