We embed human capital-based endogenous growth into a New-Keynesian model with search and matching frictions in the … labor market and skill obsolescence from long-term unemployment. The model can account for key features of the Great … aggregate demand raises unemployment and the training costs associated with skill obsolescence. Lower employment hinders …

matching efficiency shock are the two key driving forces of unemployment fluctuations. Monetary policy that stabilizes the …This paper develops a New Keynesian model with search frictions in which generated frictional unemployment is … consistent with the time series of involuntary unemployment collected by the U.S. Bureau of Labor Statistics. Thus, it can shed …

, because matching frictions render idiosyncratic labor-market risk endogenous; the supply, because markups, adjustment costs …, instead, favors unemployment-centric policy. One- and two-agent alternatives can show unanimous disapproval of inflation …

Since the advent of Heterogeneous Agent New Keynesian (HANK) models, countercyclical unemployment risk has been deemed … an important amplification mechanism for business cycles shocks. Yet, the aggregate effects of such "unemployment fears … model. While unemployment fears can exert noticeable aggregate effects, we find their magnitude to depend importantly on the …