I introduce sticky wages in the model with credit constrained or “rule of thumb” consumers advanced by Galì, Valles and Lopez Salido (2005). I show that wage stickiness i) restores, in contrast with the results in Bilbiie (2005), the Taylor Principle as a necessary condition for equilibrium...

We introduce Cournot competition and endogenous entry in an oth- erwise neoclassical macroeconomic framework. First, we develop a model with exogenous savings à la Solow describing the dynamic path of busi- ness creation. Then, we develop a model à la Ramsey describing the dynamic interaction...

We introduce endogenous strategic interactions under competition in quantities and in prices together with endogenous entry in a dynamic stochastic general equilibrium model with flexible prices. The endogenous mark ups depend on the form of competition and on the degree of substitutability...

We assess the role of national fiscal policies, as automatic stabilizers, within a monetary union. We use a two-country New Keynesian DGE model which incorporates non-Ricardian consumers (as in Galì et al. 2004) and a home bias in the composition of national consumption bundles. We find that...

Using U.S. quarterly data we provide VAR evidence showing that a positive productivity shock leads to a persistent decrease in the unemployment rate and in the price markup, together with an increase in aggregate profits. In response to the shock the labor share of income decreases on impact and...

The recent financial crisis has stimulated theoretical and empirical research on the propagation mechanisms underlying business cycles, in particular on the role of financial frictions. Many issues concerning the interactions between banking and monetary policy forced policy makers to rede.ne...

This paper provides optimal labor and dividend income taxation in a general equilibrium model with oligopolistic competition and endogenous firms' entry. In the long run the optimal dividend income tax corrects for inefficient entry. The dividend income tax depends on the form of competition and...

The recent financial crisis has stimulated theoretical and empirical research on the propagation mechanisms underlying business cycles, in particular on the role of financial frictions. Many issues concerning the interactions between banking and monetary policy forced policy makers to redefine...

It has been argued that rule of thumb consumers substantially alter the determinacy properties of simple interest rate rules and the dynamics of an otherwise standard New-keynesian model. In this paper we show that nominal wage stickiness helps re-establishing standard results. Key findings are...

We introduce Cournot competition and endogenous entry in an otherwise neoclassical macroeconomic framework. First, we develop a model with exogenous savings à la Solow describing the dynamic path of business creation. Then, we develop a model à la Ramsey describing the dynamic interaction of...