In this paper we develop a balanced growth model with labor supply and search and matching frictions in the labor market, to study the impact of economic policy variables on the two margins which constitute the (total) labor input: the extensive margin (the rate of employment) and the intensive...

Most European countries suffer from a structural weakness of employment and competitiveness. Can an optimal tax system reinforce European countries in this respect? If so, does this long-term policy act as a devaluation or a revaluation? In this paper, we show that fiscal devaluation can be an...

The paper characterizes the optimal tax scheme in an open economy with structural inefficiencies on the labor market and on government size. On analytical grounds first, we show that the economy can use fiscal revaluation to exploit the terms of trade externality and to dampen the impact of an...

This paper investigates the effects of disinflation policies on key macroeconomic variables. Using postwar US data and episode techniques, we identify disinflation shocks as shocks that drive the inflation rate to a lower level in the long-run. We find that in the immediate aftermath of a...

The recent financial crisis has highlighted the interconnectedness between macroeconomic and financial stability and has raised the question of whether and how to combine the corresponding main policy instruments (interest rate and bank-capital requirements). This paper offers a characterization...