---

Fabian Schnell develops a model indicating that by keeping real interest rates too low, monetary policy can distort the allocation of resources across firms and potentially delay economic recovery after a recession. This is a new channel of monetary policy that is especially relevant in view of "Quantitative Easing" programs. A second model focuses on the short-term implications of heterogeneously productive firms, showing an acceleration effect of technology shocks. Finally, an empirical investigation of firms´ price-setting behaviors shows that time-dependent factors, relative to state-dependent ones, play a small role with respect to the probability and the size of a price change. All results provide new insights for monetary policy.

---

Introduction: Heterogeneity and Macroeconomics.- Can Monetary Policy Delay the Reallocation of Capital?.- Business Cycles and Monetary Policy with Productivity Heterogeneity.- What Determines Price Changes and the Distribution of Prices? Evidence from the Swiss CPI.

---

Fabian Schnell, Ph.D., works as a research associate at the University of St. Gallen and as a project leader for economic policy at economiesuisse, the Swiss Business Federation.

---