Mortgage loans are a striking example of a persistent nominal rigidity. As a result, under incomplete markets, monetary policy affects decisions through the cost of new mortgage borrowing and the value of payments on outstanding debt. Observed debt levels and payment to income ratios suggest the...

In most manufacturing industries plant-level output is adjusted along three margins of capacity utilization: shiftwork, weekend work, and closing temporarily down. Due to the discrete and lumpy nature of these margins, only a fraction of plants adjust output in response to shocks. In a business...

Fluctuations in nominal variables—aggregate price levels and nominal interest rates—are documented to be substantially more synchronized across countries at business cycle frequencies than fluctuations in real output. A transparent mechanism accounting for this striking feature of the...

Mortgage loans are a striking example of a persistent nominal rigidity. As a result, under incomplete markets, monetary policy affects decisions through the cost of new mortgage borrowing and the value of payments on outstanding debt. Observed debt levels and payment to income ratios suggest the...

Long-horizon interest rates in the major international bond markets fell sharply during 2004 and 2005, at the same time as US policy rates were rising; a phenomenon famously described as a 'conundrum' by Alan Greenspan the Federal Reserve Chairman. But it was arguably the decline in...

By constructing and estimating a structural arbitrage-free model of demand pressures on US real rates, we find that recent purchases of US government debt securities by the Fed and foreign officials have significantly affected the level and the dynamics of US real rates. In particular, by 2008,...