We analyse the incidence of endogenous entry and firm TFP-heterogeneity on the response of aggregate inflation to exogenous shocks. We build up an otherwise standard DSGE model in which the number of firms is endogenously determined and firms differ in their steady state level of productivity....

In this paper we present the theoretical foundations and the simulation results obtained with a new dynamic general equilibrium model developed at the Banco de España for the Spanish economy and the rest of Euro area. The model is designed to help in simulating the effect of alternative shocks...

Standard real business cycle models are often unable to replicate three empirical facts: positive output in response to good news, stochastic volatility of macro variables, and asymmetric business cycles. This paper proposes a unified basis for understanding these facts in a tractable dynamic...

This paper studies the effects of government spending under limited international capital mobility, as featured by most developing countries. While external financing of government debt mitigates the crowding-out effect, it generates real appreciation, which contracts traded output and lowers...

This paper studies fiscal policy effects in developing countries with external debt and sovereign default risks. State-dependent distributions of fiscal limits are simulated based on macroeconomic uncertainty and fiscal policy specifications. The analysis shows that expected future revenue plays...

This paper investigates the evolution of skill imbalances in the UK labour market over the past two decades. Movements in the relative ease with which firms can recruit skilled workers can affect unemployment, inflation, and productivity. Any assessment of changes in the skill balance is...

This paper studies the existence and the scale of education externalities in the unemployment durations suffered by workers in the UK. First, we develop a theoretical model. Using a matching framework we show that a rise in the average level of education of a labour market will affect...

In this paper, annual indices of labour input adjusted for the education, age and gender distributions of the UK workforce are presented for the period 1975-2002. These measures show that improvement in labour quality, as proxied by education, age and gender, has added on average 0.67 percentage...

For standard calibration, this paper shows that the optimal price, in a model with Calvo form of price stickiness and strategic complementarities, is only defined for annualised trend inflation rates of under 5.5%. This critical inflation rate is below the average inflation rate over recent...