Lagged benefits relative to costs can politically block an efficiency-enhancing labor market reform, lending support to the "two-handed approach". An accommodating monetary policy, conducted alongside the reform, could help bringing the positive effects of the reform to the fore. In order to...

To match the stylised facts of goods and labour markets, the canonical New Keynesian model augments the optimising neoclassical growth model with nominal and real rigidities. We ask what the implications of this type of model are for asset prices. Using a second-order numerical solution to the...