We reconsider the canonical model of price setting with menu costs by Ball and Romer (1990). Their original model exhibits multiple equilibria for nominal aggregate demand shocks of intermediate size. By abandoning Ball and Romer's (1990) assumption that demand shocks are common knowledge among...

This paper investigates whether central banks can attenuate excessive mispricing in stocks as suggested by the proponents of a \leaning against the wind" (LATW) monetary policy. For this, we decompose stock prices into a fundamental component, a risk premium, and a mispricing component. We argue...

The causes of the 2008 collapse and subsequent surge in global capital flows remain an open and highly controversial issue. Employing a factor model coupled with a dataset of high-frequency portfolio capital flows to 50 economies, the paper finds that common shocks - key crisis events as well as...

The paper analyses whether, and to what extent, emerging market economies (EMEs) have systemic importance for global financial markets, above and beyond their influence during crises episodes. Using a novel database of exogenous economic and political shocks for 14 systematically relevant EMEs,...