We apply the concept of carry, which has been studied almost exclusively in currency markets, to any asset. A security's expected return is decomposed into its “carry” – an ex-ante and model-free characteristic – and its expected price appreciation. Carry predicts returns...

We assess the conditions under which exchange rate fluctuations are contractionary for firm-level investment. To address this question, we match firm-level balance sheet data with a large dataset of firm-level bonds for about 1,000 firms from 36 emerging market economies over the period...

Motivated by stylized facts pointing to a dominant role of imported inputs in transmitting external price shocks to domestic prices, this paper zooms in to study the pass-through of imported input costs to domestic producer prices. Our approach constructs effective input price indices from...

We estimate a three-country model using 1995-2013 data for Germany, the Rest of the Euro Area (REA) and the Rest of the World (ROW) to analyze the determinants of Germany's current account surplus after the launch of the Euro. The most important factors driving the German surplus were positive...

It is widely observed that primary commodity prices comove. A parallel literature asserts that correlation risk matters for financial returns. Our novel study connects these topics and presents evidence that commodity correlation risk is both non-constant and important for returns. We reconsider...

Adherence to the classical gold standard entailed nominal exchange rate rigidity between member countries. A failure of price levels to co-move between members would thus lead to real exchange rate misalignment, with potential trade imbalances and financial crises following. We examine inflation...

The UK has experienced a dramatic increase in earnings and income inequality over the past four decades. We use detailed micro level information to construct quarterly historical measures of inequality from 1969 to 2012. We investigate whether monetary policy shocks played a role in explaining...

This paper offers a reappraisal of the inflation-unemployment tradeoff, based on "frictional growth" describing the interplay between nominal frictions and money growth. When the money supply grows in the presence of price inertia (due to staggered wage contracts with time discounting), the...

Vector autoregressions with Markov-switching parameters (MS-VARs) fit the data better than do their constant-parameter predecessors. However, Bayesian inference for MS-VARs with existing algorithms remains challenging. For our first contribution, we show that Sequential Monte Carlo (SMC)...

This paper takes a new look at the long-run dynamics of inflation and unemployment in response to permanent changes in the growth rate of the money supply. We examine the Phillips curve from the perspective of what we call "frictional growth," i.e. the interaction between money growth and...