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substitution in consumption in order to account for the countercyclicality of the aggregate inventory-to-sales ratio in the data …
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these conclusions by combining a theory based on nominal rigidities and storable goods with direct evidence on inventories … bring the model's inventory predictions in line with the data. The model consistent with salient features of the dynamics of …
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This paper proposes a tractable New Keynesian (NK) economy with endogenous adjustment in product quality that nests the canonical framework. Endogenous quality choice reduces the slope of the traditional NK Phillips curve and ampliffes the economy's response to productivity shocks. This leads to...
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