We introduce labour market imperfections (i.e. unions and the existence of a wage floor) in a finance-constrained monetary economy with heterogenous agents and increasing returns to scale due to labour and capital productive externalities. We find that indeterminacy emerges for empirically...

We discuss the effects of unions in the labour market on steady-state multiplicity and welfare, and on the occurrence of local indeterminacy, local bifurcations and (stochastic and deterministic) endogenous fluctuations driven by self-fulfilling expectations. We consider an overlapping...

The central objective of this paper is to assess the empirical relevance of labour adjustment costs arising from institutional rigidities and to compare their importance across countries. It thus develops a simple dynamic bargaining model of the union monopoly type that, for the first time,...

Nominal price and wage rigidity renders monetary policy effective over output. However, this effectiveness extends, under widely used overlapping-wage and Calvo-contract Phillips Curves, to planned monetary policy (‘exploitability’) and not merely to policy surprises. We argue that within...

The paper surveys recent analyses of rising unemployment in Europe based on the concept of the natural rate. It argues that there is a continuity of analysis from the classics through Keynes to these more recent approaches. Theories of efficiency wages, hysteresis, and insiders/outsiders are...

We log-linearise the Dellas and Tavlas (DT) model of monetary union and solve it analytically. We find that the intuition of optimal currency analysis of DT's second generation open economy model is essentially the same as that of first generation models. Monetary union results in no welfare...