This paper analyses the consequences of the existence of financial frictions and of a banking system on business cycles, in a new Keynesian macroeconomics model. We contrast our conclusions with those obtained in two other existing frameworks (namely the canonical nns model of Woodford, [2003]...

Wage stickiness is incorporated to a New-Keynesian model with variable capital to drive endogenous unemployment fluctuations defined as the log difference between aggregate labor supply and aggregate labor demand. We estimated such model using Bayesian econometric techniques and quarterly US...

Erceg et al. (J Monet Econ 46:281–313, <CitationRef CitationID="CR18">2000</CitationRef>) introduce sticky wages in a New-Keynesian general-equilibrium model. Alternatively, it is shown here how wage stickiness may bring unemployment fluctuations into a New-Keynesian model. Using a Bayesian econometric approach, both models are...</citationref>

Dynamic optimizing models with an IS-LM-type structure and slow price adjustments have been used for much recent monetary policy analysis, but usually with capital and investment treated as exogenous a significant restriction. This paper demonstrates that investment decisions can be endogenized...

This paper examines how price setting plays a key role in explaining the steady-state effects of inflation in a monopolistic competition economy with transactions-facilitating money. Three pricing variants (optimal prices, indexed prices, and unchanged prices) are introduced through a...

The introduction of both market-clearing wages and nominal rigidities on wage setting can be used to rationalize unemployment as excess supply of labor in the New Keynesian model. As a result, wage inflation dynamics are forward-looking and depend negatively on the rate of unemployment....

The implications of search frictions on the inflation dynamics are shown here for the case with wage adjustments typically belonging to the New Keynesian model, not to the Mortensen-Pissarides framework. In that model variant, I identify the role of search frictions by an additional term...

Employment fluctuations are examined, at different levels of aggregation, in a model with firm-specific hiring decisions due to search frictions and sticky pricing. The results indicate that firm-level employment dispersion rises with higher price stickiness and higher demand elasticity, whereas...

Two sticky-wage models are introduced in this paper to examine the implications of having either households or firms as wage setting actors. The rate of wage inflation depends positively on the output gap if households set wages whereas such a relationship is of negative sign when firms set...