Population aging is a phenomenon common to all regions in the developed world, forcing most governments to implement structural reforms in order to avoid the development of fiscal imbalances. In Luxembourg, large inflows of – young – foreign workers generate an apparently sound public...

We develop a search-matching model, where firms search for customers (e.g. in form of advertising). Firms use long-term contracts and bargain over prices, resulting in a price mark up above marginal cost, which is pro- cyclical and depends on firms’ relative bargaining power. Product market...

We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers’ bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more...

This paper reviews recent approaches to modeling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behaviour. In a search and matching environment, we consider the following modeling setups: right-to-manage...

We develop a dynamic stochastic general equilibrium model with an heterogeneous banking sector. We introduce endogenous default probabilities for both firms and banks, and allow for bank regulation and liquidity injection into the interbank market. Our aim is to understand the interactions...

Empirical evidence suggests that most firms operate in imperfectly competitivemarkets. We develop a search-matching model between wholesalers and retailers. Firms face search costs and form long-term relationships. Price bargain results in both wholesaler and retailer markups, depending on...

The contrast between the evolution over the last decades of the EU and the US unemployment rates, especially for the low-skilled, is well known. A consensus view is that these different outcomes can be explained by the interactions between common shocks and specific institutional setups. In this...

We develop a dynamic stochastic general equilibrium model with an heterogeneous banking sector. We introduce endogenous default probabilities for both firms and banks, and allow for bank regulation and liquidity injection into the interbank market. Our aim is to understand the interactions...

Empirical evidence shows that some firms may be capital constraint because of capital market imperfections. We therefore extend the business cycle models with frictions `a la Pissarides on the labour market by also introducing symmetric frictions on the capital market. We show that the capital...