In this paper we study the optimal monetary and fiscal policies of a general equilibrium model of unemployment and money with search frictions both in labor and goods markets as in Berentsen, Menzio and Wright (2010). We abstract from revenue-raising motives to focus on the welfare-enhancing...

We consider a directed search environment where capacity constrained sellers reach uncoordinated buyers through costly advertising while buyers observed all prices probabilistically. We show that: (i) the equilibrium advertising intensity has an inverted U-shape in market tightness, (ii) the...

We characterize equilibrium in a frictional environment where prices are not perfectly observed. Sellers send costly advertisements, which endogenously create buyers heterogeneity, to direct buyers' uncoordinated search, as in Butters (1977). The model helps understand advertising patterns in...