We investigate the macroeconomic consequences of fluctuations in the effectiveness of the labor-market matching process with a focus on the Great Recession. We conduct our analysis in the context of an estimated medium-scale DSGE model with sticky prices and equilibrium search unemployment that...

We investigate the macroeconomic consequences of fluctuations in the effectiveness of the labor-market matching process with a focus on the Great Recession. We conduct our analysis in the context of an estimated medium-scale DSGE model with sticky prices and equilibrium search unemployment that...

Recent empirical evidence suggests that product creation is pro-cyclical and it occurs largely within existing firms. Motivated by these findings, the current paper investigates the role of intra-firm product scope choice in a general equilibrium economy with oligopolistic producers. We show...

We show that a one-sector real business cycle model with variable capital utilization and mild increasing returns-to-scale is able to generate qualitatively as well as quantitatively realistic aggregate fluctuations driven by news shocks to future consumption demand. In sharp contrast to many...

The standard one-sector real business cycle model is unable to generate expectations-driven fluctuations. The addition of countercyclical markups and modest investment adjustment costs offers an easy fix to this conundrum. The simulated model generates quantitatively realistic business cycles...

High degrees of relative risk aversion induce indeterminacy in cash-in-advance economies. This paper finds that Taylor-style policies can pre-empt such sunspot equilibria. Specific policy recommendations depend on the fundamentals of the economy, i.e. the empirically true value of coecient of...

This paper examines the effect of the elasticity of technological substitution on the existence of equilibrium indeterminacy in two-sector economies. Recent empirical evidence, the elasticity of substitution between capital and labor is below unity. We ?nd that this requires a higher degree of...

In this paper, we address the causes of the Roaring Twenties in the United States. In particular, we use a version of the real business cycle model to test the hypothesis that an extraordinary pace of productivity growth was the driving factor. Our motivation comes from the abundance of evidence...

Payroll taxes represent a major distortionary in uence of governments on labor markets. This paper examines the role of payroll taxation and the social safety net for cyclical uctuations in a nonmonetary economy with labor market frictions and unemployment insurance, when the latter is only...

This paper presents a one-sector optimal growth model with variable capacity services and production externalities. It uses a new formulation of the endogenous capital utilization rate in which utilization costs appear in the form of variable maintenance expenses. I find that indeterminacy...