Search Results
Working Paper
A Phillips curve with an Ss foundation
We develop an analytically tractable Phillips curve based on state-dependent pricing. We differ from the existing literature by considering a local approximation around a zero inflation steady state and introducing idiosyncratic shocks. The resulting Phillips curve is a simple variation of the conventional time-dependent Calvo formulation but with some important differences. First, the model is able to match the micro evidence on both the magnitude and timing of price adjustments. Second, holding constant the frequency of price adjustment, our state-dependent model exhibits greater ...
Conference Paper
Developing country borrowing and domestic wealth
Conference Paper
Commentary: financial crises and economic activity
Working Paper
Current Account Dynamics and Monetary Policy
We explore the implications of current account adjustment for monetary policy within a simple two country DSGE model. Our framework nests Obstfeld and Rogoff's (2005) static model of exchange rate responsiveness to current account reversals. It extends this approach by endogenizing the dynamic adjustment path and by incorporating production and nominal price rigidities in order to study the role of monetary policy. We consider two different adjustment scenarios. The first is a "slow burn"where the adjustment of the current account deficit of the home country is smooth and slow. The second is ...
Journal Article
Are banks dead? Or are the reports greatly exaggerated?
This article reexamines the conventional wisdom that commercial banking is in severe decline. A careful reading of the evidence does not support it. True, on-balance sheet assets held by commercial banks have declined as a share of total intermediary assets. But this measure ignores the substantial growth in banks' off-balance sheet activities, in off-shore lending by foreign banks, and in the size of the financial intermediation sector. Adjusted for these considerations, the bank-assets measure shows no clear evidence of secular decline. Neither does an alternative measure, constructed using ...
Report
Micro and Macro Cost-Price Dynamics in Normal Times and During Inflation Surges
We develop a unified approach to studying cost-price dynamics in the cross-section of firms in order to jointly explain the time series of aggregate inflation and the frequency of price changes, both during normal times and inflation surges. A key novelty is the use of microdata on firms’ prices and production costs to construct an empirical measure of price gaps—the deviation between a firm’s listed and optimal price. Conditional on the path of aggregate cost shocks extracted from the data, a state-dependent pricing model with strategic complementarities accounts well for both the ...