of the two shortcomings.

An extension of our basic model introduces sectoral production and endogenises the set of sectors active at any time. This allows us to address cross-country evidence on the higher relative price of investment

Inflation and unemployment are central issues in macroeconomics. While much progress has been made on these issues by incorporating frictions using search theory, existing models analyze either unemployment or inflation. We develop a framework to analyze unemployment and inflation together. This...