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....

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...

Despite having had the same currency for many years, EMU countries still have quite different inflation dynamics. In this paper we explore one possible reason: country specific labor market institutions, giving rise to different inflation volatilities. When unemployment insurance schemes differ,...

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...

Some interesting conclusions on the desirability of monetary policy reactions to increased oil prices can be also drawn.

Hence, our analysis sheds new light on trade policy in a model of intra-industry trade.

employment on top and above inflation.

The optimal response of monetary policy to financial instability is a long standing question whose policy relevance is now emphasized by the increase in available liquidity and in firms’ financial exposure. Bernanke, Gertler and Gilchrist (1998) build a model in which credit frictions occur on...

We analyze welfare maximizing monetary policy in a dynamic two-country model with price stickiness and imperfect competition. In this context, a typical terms of trade externality affects policy interaction between independent monetary authorities. Unlike the existing literature, we remain...