Journal ArticleReview 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, ...
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Journal ArticleQuarterly 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 ...
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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 ...
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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 ...
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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 ...
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Journal ArticleJournal of Political Economy · October 1, 2018
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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 ...
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OtherEconomic 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 ...
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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 ...
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