We develop a search-matching model, where firms search for customers (e.g. in form of advertising). Firms use long-term contracts and bargain over prices, resulting in a price mark up above marginal cost, which is pro- cyclical and depends on firms’ relative bargaining power. Product market...

How should monetary policy respond to changes in financial conditions? In this paper we consider a simple model where firms are subject to idiosyncratic shocks which may force them to default on their debt. Firms' assets and liabilities are denominated in nominal terms and predetermined when...

This paper presents the Spanish country block (ES-MCM) of the ESCB Multi-Country Model for the euro area, which has been built in a close co-operation with the ECB and the Banco de Espaa. The theoretical structure of the ES-MCM block is in line with most current mainstream macro models, i.e. the...

DSGE-models have become important tools of analysis not only in academia but increasingly in the board rooms of central banks. The success of these models has much to do with the coherence of the intellectual framework it provides. The limitations of these models come from the fact that they...

We develop a search-matching model, where firms search for customers (e.g. in form of advertising). Firms use long-term contracts and bargain over prices, resulting in a price mark up above marginal cost, which is procyclical and depends on firms' relative bargaining power. Product market...

DSGE-models have become important tools of analysis not only in academia but increasingly in the board rooms of central banks. The success of these models has much to do with the coherence of the intellectual framework it provides. The limitations of these models come from the fact that they...

Questions about market power have become salient in macroeconomics. We consider the role of institutional structures in addressing these within a dynamic general equilibrium framework. Standard models account for monopoly profits as a lump-sum transfer to the representative agent. We label this...

This paper provides new survey evidence on firms' inflation expectations in the euro area. Building on the ECB's Survey on the Access to Finance of Enterprises (SAFE), we introduce consistent measurement of inflation expectations across countries and shed new light on the properties and causal...

Structural models are a powerful tool for business cycle and monetary policy analysis because they are invariant to either policy changes or external shocks. In this paper, we derive a Sidrauski-type model in which both the demand and supply side are structural in the sense that the behavioral...