This paper argues that, despite important productivity gains, reforms have benefited consumers much less than expected in El Salvador. Antitrust legislation, consumer protection and an adequate regulation of privatized utilities are central ingredients of a successful market economy. Major...

Cooper and Willis (2003) is the latest in a sequence of criticisms of our methodology for estimating aggregate nonlinearities when microeconomic adjustment is lumpy. Their case is based on 'reproducing' our main findings using artificial data generated by a model where microeconomic agents face...

We characterize the degree of microeconomic inflexibility in several Latin American economies and find that Brazil, Chile and Colombia are more flexible than Mexico and Venezuela. The difference in flexibility among these economies is mainly explained by the behavior of large establishments,...

"The government contracts with a foreign firm to extract a natural resource that requires an upfront investment and which faces price uncertainty. In states where profits are high, there is a likelihood of expropriation, which generates a social cost that increases with the expropriated value....

In this paper we characterize the average response of output to aggregate demand shocks in an economy where individual firms follow state-dependent pricing rules. We find that: (i) the average response of output to aggregate demand shocks decreases with core inflation and varies...

In this paper we derive a model of aggregate investment that builds from the lumpy microeconomic behavior of firms facing stochastic fixed adjustment costs. Instead of the standard sharp (S,s) bands, firms' adjustment policies take the form of a probability of adjustment (adjustment hazard) that...

This paper argues that, despite important productivity gains, reforms have benefited consumers much less than expected in El Salvador. Antitrust legislation, consumer protection and an adequate regulation of privatized utilities are central ingredients of a successful market economy. Major...

Microeconomic flexibility is at the core of economic growth in modern market economies because it facilitates the process of creative-destruction, The main reason why this process is not infinitely fast, is the presence of adjustment costs, some of them technological, others institutional. Chief...

The sensitivity of U.S. aggregate investment to shocks is procyclical: the initial response increases by approximately 50% from the trough to the peak of the business cycle. This feature of the data follows naturally from a DSGE model with lumpy microeconomic capital adjustment. Beyond...

What is the relation between infrequent price adjustment and the dynamic response of the aggregate price level to monetary shocks? The answer to this question ranges from a one-to-one link (Calvo, 1983) to no connection whatsoever (Caplin and Spulber, 1987). The purpose of this paper is to...