We study the implications of increased price flexibility on aggregate output volatility in a dynamic stochastic general equilibrium (DSGE) model. First, using a simplified version of the model, we show analytically that the results depend on the shocks driving the economy and the systematic...

We study the implications of increased price flexibility on output volatility. In a simple DSGE model, we show analytically that more flexible prices always amplify output volatility for supply shocks and also amplify output volatility for demand shocks if monetary policy does not respond...

Using micro-data on U.S. producer prices, we establish three new facts about price setting by multi-product firms. First, firms selling more goods adjust prices more frequently but on average by smaller amounts. Moreover, their fraction of positive price changes is lower and the dispersion of...

In this paper, we establish three new facts about price-setting by multi-product firms and contribute a model that can match our findings. On the empirical side, using micro-data on U.S. producer prices, we first show that firms selling more goods adjust their prices more frequently but on...

In this paper, we establish three new facts about price-setting by multiproduct firms and contribute a model that can explain our findings. Our findings have important implications for real effects of nominal shocks and provide guidance for how to model pricing decisions of firms. On the...

In this paper, we establish three new facts about price-setting by multi-product firms and contribute a model that can explain our findings. On the empirical side, using micro-data on U.S. producer prices, we first show that firms selling more goods adjust their prices more frequently but on...

We propose a theory to explain why, and under what circumstances, a politician endogenously gives up rent and delegates policy tasks to an independent agency. Applied to monetary policy, this theory (i) formalizes the rationale for delegation highlighted by Alexander Hamilton, the first...

This paper proposes a new paradox: the paradox of toil. Suppose everyone wakes up one day and decides they want to work more. What happens to aggregate employment? This paper shows that, under certain conditions, aggregate employment falls; that is, there is less work in the aggregate because...

We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities, explicitly incorporating the zero bound on the short-term nominal interest rate. Within this framework, we ask: Can a shock to the liquidity of private paper lead to a collapse in short-term...

A rich literature from the 1970s shows that as inflation expectations become more and more ingrained, monetary policy loses its stimulative effect. In the extreme, with perfectly anticipated inflation, there is no trade-off between inflation and output. A recent literature on the interest-rate...