Inflation Distorts Relative Prices: Theory and Evidence
with Andrey Alexandrov and Henning Weber, October 2023

Using a novel identification approach derived from sticky price theories with time or state-dependent adjustment frictions, we empirically identify the effect of inflation on relative price distortions. The approach can be directly applied to micro price data, does not rely on estimating the gap between actual and flexible prices, and only assumes stationarity of unobserved shocks.

Subjective Housing Expectations, Falling Natural Rates and the Optimal Inflation Target
with Oliver Pfaeuti and Timo Reinelt,  updated July 2023,  also available as CEPR Discussion Paper

The paper documents a number of dimension along which how housing price expectaitons deviate from rational expectations. It then shows that these deviations and the behavior of housing prices can be jointly explained by capital gain extrapolation. Embedding capital gain extraplation into sticky price model with a lower bound, we show how lower natural rates give rise to monetary policy implications that differ substantially from the ones implied by rational housing price expectations.

Markups and Marginal Costs over the Firm Life: Implications for the Optimal Inflation Target, with Tobias Renkin and Gabriel Zuellig, October 2023 (preliminary version) 
We estimate the dynamics of relative markups, marginal costs and prices over the firm
life cycle using detailed firm data from Denmark. Relative marginal costs fall strongly
over the first 15 years of firm life, but relative prices fall only weakly due to a strong
rise in relative markups. Relative price trends thus underestimate trends in relative
productivity. This distorts recent estimates of the optimal inflation target downward
by 0.2-1.2% per year. We show that relative markups increase following the introduc-
tion of new products and the discontinuation of old products.  

Stock Prices Cycles and Business Cycles, with Sebastian Merkel, June 2019

We present a simple RBC model that jointly replicates the behavior of stock prices and business cycles. The model predicts that low interest rates make stock price boom-bust cycles more likely and that these cycles are triggered by a sequence of positive productivity surprises.