The paper investigates whether the growing GDP share of the services sector can contribute to explain the great moderation in the US. We identify and analyze three oil price shocks and use a SVAR analysis to measure their economic impact on the US economy at both the aggregate and the sectoral...

This paper analyzes when and why idiosyncratic oil supply shocks produce large macroeconomic effects in an analytically tractable two-country general equilibrium model. We focus on a demand-driven mechanism, the trade channel, which transmits oil shocks across economies through changes in the...

The PIGS countries have suffered economic instability and fiscal havoc in the aftermath of the Financial Crisis. We argue this is the consequence of pursuing procyclical fiscal policies. We add a fiscal rule, which varies public spending with the cycle, to an otherwise standard RBC model of a...

Recent theoretical literature claims that demand-driven transmission mechanisms are the key to understand how oil shocks affect the economy. Following this literature, we measure the economic strength of one of these demand-driven channels, the trade channel, in the transmission of oil shocks to...

The Financial Crisis has hit particularly hard countries like Ireland or Spain. Procyclical fiscal policy has contributed to a boom-bust cycle that undermined fiscal positions and deepened current account deficits during the boom. We set up an RBC model of a small open economy, following Mendoza...

We model the Spanish wholesale market as a multiplant linear supply function competition model. According to the theory, the larger generators should have supply curves for each plant which are to the left of the supply curves of plants owned by smaller generators. We test this prediction for...

This paper analyzes whether a minimum wage can be an optimal redistribution policy when distorting taxes and lump-sum transfers are also available in a competitive economy. We build a static general equilibrium model with a Ramsey planner making decisions on taxes, transfers, and minimum wage...

This paper considers the basic present value model of interest rates under rational expectations with two additional features. First, following McCallum (1994), the model assumes a policy reaction function where changes in the short-term interest rate are determined by the long-short spread....