The endorsement of expansionary fiscal packages has often been based on the idea that large multipliers can contrast rising unemployment. Is that really the case? We explore those issues in a New Keynesian model in which unemployment arises because of matching frictions. We compare fiscal...

The endorsement of expansionary fiscal packages has often been based on the idea that large multipliers can contrast rising unemployment. Is that really the case? We explore those issues in a New Keynesian model in which unemployment arises because of matching frictions. We compare fiscal...

This paper relates the size of the cyclical inflation differentials, currently observed for euro area countries, to the differences in labor market institutions across the same set of countries. It does that by using a DSGE model for a currency area with sticky prices and labor market frictions....

During the Great Recession following the recent financial crisis large fiscal stimuli were implemented to counteract labor market sclerosis. We explore the effectiveness of various fiscal packages in a matching model featuring inefficient unemployment and a rich fiscal sector employing...

We incorporate a participation decision in a standard New Keynesian model with matching frictions and show that treating the labor force as constant leads to incorrect evaluation of alternative policies. We also show that the presence of a participation margin mitigates the Shimer critique.

We study trade policy in a two-sector Krugman type model of trade. We conduct a general analysis allowing for three different instruments: tariffs, export taxes and production subsidies. For each instrument we consider unilateral trade policy without retaliation. When carefully disentangling the...

In a closed economy context there is common agreement on price inflation stabilization being one of the objects of monetary policy. Moving to an open economy context gives rise to the coexistence of two measures of inflation: domestic inflation (DI) and consumer price inflation (CPI). Which one...

We study trade policy in a two-sector Krugman-type trade model with home market effects. We conduct a general analysis allowing for three different instruments: tariffs, export taxes and production subsidies. For each instrument, we consider unilateral trade policy without retaliation. When...

From the last quarter of 2001 to the third quarter of 2005 the real price of oil increased by 103%. Such an increase is comparable to the one experienced during the oil shock of 1973. At the same time, the behaviour of real GDP growth, Consumer Price inflation (CPI inflation), GDP Deflator...

In the present paper we examine how the introduction of endogenous participation in an otherwise standard DSGE model with matching frictions and nominal rigidities affects business cycle dynamics and monetary policy. The contribution of the paper is threefold: first, we show that the model...