Publications

Monetary Policy and Exchange Rate Dynamics in a Behavioral Open Economy Model
with Marcin Kolasa and Pawel Zabczyk. Journal of International Economics 155: 104087 (2025).

We analyze the implications of adding boundedly rational agents à la Gabaix (2020) to the canonical New Keynesian open economy model. We show that accounting for myopia mitigates several “puzzling” aspects of the relationship between exchange rates and interest rates and helps explain why some of them only arise in the nested case of rational expectations. Bayesian estimation of the model demonstrates that high degrees of “cognitive discounting” significantly improve empirical fit. We also show that this form of bounded rationality makes positive international monetary spillovers more likely and exacerbates the unit root problem in small open economies with incomplete markets.

Published Version Online Appendix IMF Working Paper Replication Code


Work in Progress

New Keynesian Model of Debt and Equity without Rational Expectations
with Bruce Preston and Stefano Eusepi.

Fiscal Consolidation and Bounded Rationality
with Hyungseok Joo.

Linear-Quadratic Approximation of a Small Open Economy NK Model
with Leilane Cambara and Paul Levine.

Habit, Forward Guidance, and Monetary Policy


Discussions

Endogenous Cognitive Discounting
by James Moberly.

Slides

Monetary Policy in a Small Open Economy with Multiple Monetary Assets
by William Barnett and Van Nguyen.

Slides