- Adaptive learning helps to improve international correlation in a multi-country model
- The correlation is improved through time-varying coefficients
- The shock spill-overs are stronger (including monetary policy), as well as impact of real exchange rate shocks
- Document a fall in inflation persistence and volatility since the mid 1980s
- Show that the NK model cannot explain the fall in persistence
- Document a change in information frictions in the mid 1980s
- Build a noisy information framework
- Implications on the (lack of) flattening in the Phillips curve
- We show how E-stability analysis is useful to study forward guidance policy
- We show that Iterative E-stability of a rational forward guidance solution rules out the Forward Guidance Puzzle
- IE-stability implies that the Forward Guidance Puzzle does not follow from indeterminacy
- We show that true indeterminacy in the form of a sunspot solution eliminates the Forward Guidance Puzzle
- Applications to the Smets and Wouters model, Behavioral New Keynesian model, Markov-switching models, and sticky information models
- This paper provides a theoretical model to understand economic fluctuations associated with real estate booms and busts from a new perspective.
- The price of land and other key macro variables (wages, output, consumption, wealth, capital) endogenously fluctuate within a certain bound, without either converging or diverging while generating “endogenous phase transitions”.
- The key disturbance to the economy is “endogenous”, and “endogenous crash” occurs. “Seemingly explosive paths” in the price of land can occur in equilibrium.
- A low interest rate environment inevitably leads to large boom and bust cycles in land prices and large macroeconomic fluctuations.
- Appropriately chosen government policies achieve macroeconomic stability and efficiency.
- The multivariate dynamic rational inattention tracking problem is solved in the frequency domain, complementing recent time-domain work.
- The main result is a rational inattention version of the classical Wiener-Kolmogorov filter.
- The filter can be used to find closed-form expressions in a number of cases and can be solved numerically with a simple iterative algorithm.
- The paper shows that anticipation effects are a manifestation of the uncertainty principle familiar from quantum mechanics.
- A generál equilibrium trade model is developed, in which exporter dynamics are driven by frictions in customer acquisition and learning about demand.
- The model matches key features of exporter dynamics from the data: the evolution of quantities and prices over time, conditional on export spell length; and exporter survival rates conditional on spell length.
- Accounting for exporter dynamics increases the sensitivity of GDP to changes in iceberg costs for relatively open economies, and decreases the sensitivity for relatively closed economies.
- For the US, the gains from eliminating iceberg costs are estimated to increase by 30% across steady states, while the losses from doubling them are estimated to be 60% smaller.