Staggered price and staggered wage contracts are commonly viewed as similar mechanisms in generating persistent real effects of monetary shocks. In this paper, we distinguish the two mechanisms in a dynamic stochastic general equilibrium framework. We show that, although the dynamic price...

We test whether dynamic, stochastic, general equilibrium artificial economies associated with several labor market institutions provide an adequate characterization of aggregate employment volatility and dynamics. Our test is robust to possible misspecifications about the information set used by...

This paper re-examines the conventional wisdom on the equivalence of staggered-wage setting and staggered-price setting in generating persistent real effects of aggregate demand shocks in a dynamic general equilibrium framework with an input-output production structure. Under staggered-wage...

In this paper, we show that in a dynamic general equilibrium economy, the presence of moral hazard need not induce large cuts in optimal unemployment insurance benefits. We find that it takes a quite large proportion of "shirkers" to bend the generosity of the optimal unemployment insurance...

In this paper, we show that in a dynamic general equilibrium economy, the presence of moral hazard need not induce large cuts in optimal unemployment insurance benefits when agents are asked to vote on these benefits. We find that it takes a quite large proportion of "shirkers" to bend the...

When it is costly for agents to find a match, integrating small markets into a larger one increases the matching difficulty. We examine such dependence of the number of matches on the market size by explicitely modelling firms' attempt to attract workers by posting wages. It is shown that...

This paper studies a general-equilibrium model of a dynamic economy with menu costs. Each firm's productivity is exposed to idiosyncratic and aggregate productivity shocks around a trend, and the money supply to monetary shocks around a trend. All consumption, pricing, and production decisions...

This paper studies a general equilibrium model with multiple stages of production and sticky prices. Working through the input-output relations among industries at different stages and the timing of firms' pricing decisions, the model generates persistent fluctuations in both the inflation rate...

The business cycle implications of optimal wage indexation are investigated in a dynamic general equilibrium model with wage contracts. As in Gray's seminal contribution on wage indexation, it is shown that the optimal degree of indexation depends on the relative volatilities of monetary and...

We build a dynamic general equilibrium model of a semi-small open economy in which staggered wage contracts are the only source of nominal rigidity. The model is capable of generating highly variable real and nominal exchange rates while predicting relative variabilities of prices and...