We estimate a New Keynesian model with matching frictions and nominal wage rigidities on UK data. We are able to identify important structural parameters, recover the unobservable shocks that have affected the UK economy since 1971 and study the transmission mechanism. With matching frictions,...

This paper explores the influence of some key institutional features of the labour market on aggregate fluctuations. It uses a dynamic, stochastic, general equilibrium model characterised by search and matching frictions in the labour market and nominal rigidities in the goods market. It finds...

When the economy is in a liquidity trap and households have a precautionary motive to save against unemployment risk, adverse demand shocks cause severe deflationary spirals and output contractions. In this context, we study the implications of optimal monetary policy, which consists of keeping...

The standard search and matching model with rational expectations is well known to be unable to generate amplification in unemployment and vacancies. We document a new feature it is unable to replicate: properties of survey forecasts of unemployment in the near term. We present a parsimonious...

In line with most of the developed world, the United Kingdom experienced in 2008–09 its worst recession since the Great Depression of the 1920s and 30s: the Great Recession. But despite the 6% peak-to-trough fall in output (as measured by real gross value added at basic prices) the...

We study the effects of firm-level microeconomic fluctuations on aggregate productivity in the United Kingdom. We show that a standard measure of residual productivity growth of the largest UK firms (the ‘granular residual') produces results that are counter-intuitive and not statistically...

The notion that the long-term unemployed are relatively detached from the labour market and therefore exert only little downward pressure on wage inflation has regained significant traction recently. This paper investigates whether the conclusion that long-term unemployment is only weakly...

This paper investigates how compositional changes in the UK labour market affect the matching process between vacancies and job seekers. We augment a state space representation of the aggregate matching function with a measure of job seekers' ‘search intensity' that is recovered from...

We analyse the impact of Covid-19 on productivity using data from an innovative monthly firm survey panel that asks for quantitative impacts of Covid on inputs and outputs. We find total factor productivity (TFP) fell by up to 5% during 2020–21. The overall impact combined large reductions in...

We study two key characteristics of producers in a production network – size and centrality – and their relationship, which are intimately related to the extent of shock transmission in production networks, both at a macro and micro level. Our contributions are fourfold. First, we show...