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Cosmin L. Ilut

Professor of Economics
Box 90097, Durham, NC 27708-0097
238 Social Sciences, Box 90097, Durham, NC 27708

Selected Publications

Diagnostic Business Cycles

Journal Article Review of Economic Studies · January 1, 2024 A large psychology literature argues that, due to selective memory recall, decision-makers' forecasts of the future are overly influenced by the perceived news. We adopt the diagnostic expectations (DE) paradigm [Bordalo et al. (2018), Journal of Finance, ... Full text Cite

Economic Agents as Imperfect Problem Solvers

Journal Article Quarterly Journal of Economics · February 1, 2023 We develop a novel bounded rationality model of imperfect reasoning as the interaction between automatic (System 1) and analytical (System 2) thinking. In doing so, we formalize the empirical consensus of cognitive psychology using a structural, constraine ... Full text Cite


Chapter · January 1, 2022 We survey the literature on ambiguity with an emphasis on recent applications in macroeconomics and finance. Like risk, ambiguity leads to cautious behavior and uncertainty premia in asset markets. Unlike risk, ambiguity can generate first-order welfare lo ... Full text Cite

Learning, confidence, and business cycles

Scholarly Edition · January 1, 2021 We argue that information accumulation provides a quantitatively successful propagation mechanism that challenges and empirically improves on the conventional New Keynesian models with many nominal and real rigidities. In particular, we build a tractable h ... Full text Cite

Paralyzed by Fear: Rigid and Discrete Pricing Under Demand Uncertainty

Scholarly Edition · September 1, 2020 We propose a new theory of price rigidity based on firms' Knightian uncertainty about their competitive environment. This uncertainty has two key implications. First, firms learn about the shape of their demand function from past observations of quantities ... Full text Cite

Slow to hire, quick to fire: Employment dynamics with asymmetric responses to news

Journal Article Journal of Political Economy · October 1, 2018 Featured Publication Concave hiring rules imply that firms respond more to bad shocks than to good shocks. They provide a unified explanation for several seemingly unrelated facts about employment growth in macro-and microdata. In particular, they generate countercyclical move ... Full text Open Access Cite

Evidence for Relational Contracts in Sovereign Bank Lending

Journal Article Journal of the European Economic Association · September 29, 2015 Link to item Cite

Ambiguous Business Cycles

Journal Article American Economic Review · August 2014 Full text Open Access Cite

Monetary/Fiscal Policy Mix and Agents’ Beliefs

Other Economic Research Initiatives at Duke (ERID) Working Paper · May 1, 2014 We reinterpret post World War II US economic history using an estimated microfounded model that allows for changes in the monetary/fiscal policy mix. We find that the fiscal authority was the leading authority in the ‘60s and the ‘70s. The appointment of V ... Cite

Ambiguity aversion: Implications for the uncovered interest rate parity puzzle

Scholarly Edition · July 1, 2012 High interest rate currencies tend to appreciate in the future relative to low interest rate currencies instead of depreciating as uncovered interest parity (UIP) predicts. I construct a model of exchange rate determination in which ambiguity-averse agents ... Full text Cite

Monetary Policy and Stock Market Booms

Scholarly Edition · September 24, 2010 Cite