We develop a simple model of the foreign exchange market in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one.This model produces two kinds of equilibria, a fundamental and a bubble...

In this paper we develop a model of the exchange rate. The existence of transactions costs introduces an important non-linearity. Agents have different beliefs about the future exchange rate. We show that this simple model creates great complexity in the market which is characterised by the fact...

This paper shows that increases in the minimum wage rate can have ambiguous effects on the working hours and welfare of employed workers in competitive labor markets. The reason is that employers may not comply with the minimum wage legislation and instead pay a lower subminimum wage rate. If...

We introduce search and matching unemployment into a model of trade with differentiated goods and heterogeneous firms. Countries may differ with respect to size, geographical location, and labor market institutions. Contrary to the literature, our single-sector perspective pays special attention...

This paper investigates equilibria in a labor market where firms post wage/tenure contracts and risk-averse workers, both employed and unemployed, search for better paid job opportunities. Different firms typically offer different contracts. Workers accumulate general human capital through...

We characterize optimal redistributive taxation when individuals are heterogeneous in their skills and their values of non-market activities. Search-matching frictions on the labor markets create unemployment. Wages, labor demand and participation are endogenous. Average tax rates are increasing...