We propose a novel forecast evaluation methodology to assess models’ absolute and relative forecasting performance when it is a state-dependent function of economic variables. In our framework, the forecasting performance, ...

This paper explores a natural connection between fiscal multipliers and foreign holdings of public debt. Although fiscal expansions can raise domestic economic activity through various channels, they can also have crowding-out ...

This paper develops a theoretical framework to study the interaction between globalization and political structure. We show that political structure adapts in a non-monotonic way to declining transport costs. Borders hamper ...

The recent financial crisis led central banks to lower their interest rates in order to stimulate the economy until they hit the zero lower bound. How should one identify monetary policy shocks in unconventional times? ...

We study optimal policy when the planner has partial information in a general setup where observed signals are endogenous to policy. In this context, signal extraction and policy have to be determined jointly. We derive a ...

Many real-world contracts contain vague clauses despite the enforcement risk they entail. To study the causes and consequences of this phenomenon, we build a principal agent model in which contracts can include vague clauses ...

We present a model that reproduces two salient facts characterizing the international monetary system: Fast growing emerging countries i) run current account surpluses, ii) accumulate international reserves and receive net ...

We study the determinants of comparative advantage in polluting industries. We combine data on environmental policy at the country level with data on pollution intensity at the industry level to show that countries with ...

Trade barriers cause substantial deadweight losses, yet they enjoy surprising voter support. We develop an electoral model that accounts for this puzzling popularity of protectionism. Producers have incentives to acquire ...

We study how changes in the steady-state real interest rate (henceforth, r*) affect the optimal inflation target in a New Keynesian DSGE model with trend inflation and a lower bound on the nominal interest rate. In this ...