We explore the distortions in business cycle models arising from inefficiencies in price setting and in the search process matching firms to unemployed workers, and the implications of these distortions for monetary policy. To this end, we characterize the tax instruments that would implement...

This paper employs the one-sector Real Business Cycle model as a testing ground for four different procedures to estimate Dynamic Stochastic General Equilibrium (DSGE) models. The procedures are: 1 ) Maximum Likelihood, with and without measurement errors and incorporating Bayesian priors, 2)...

This paper proposes a conceptual framework to investigate the impact of military conflicts on business cycles, as well as defense policies through enrolment mechanisms. Our framework is a variation of a Real Business Cycle model first proposed by Hercowitz and Sampson (1991) that admits explicit...

This paper employs the one-sector Real Business Cycle model as a testing ground for four different procedures to estimate Dynamic Stochastic General Equilibrium (DSGE) models. The procedures are: 1) Maximum Likelihood, with and without measurement errors and incorporating Bayesian priors, 2)...

How does openness affect economic development? This question is answered in the context of a dynamic general equilibrium model of the world economy, where countries have technological differences that are both sector-neutral and specific to the investment goods sector. Relative to a benchmark...

How does openness affect economic development? This question is answered in the context of a dynamic general equilibrium model of the world economy, where countries have technological differences that are both sector-neutral and specific to the investment goods sector. Relative to a benchmark...

In this paper, we measure the welfare costs/gains associated with financial market incompleteness in a monetary union. To do this, we build on a two-country model of a monetary union with sticky prices subject to asymmetric productivity shocks. For most plausible values of price stickiness, we...

This paper develops and estimates a game-theoretical model of inflation targeting where the central banker's preferences are asymmetric around the targeted rate.

This paper studies monetary policy in an economy where the central banker's preferences are asymmetric around optimal inflation. In particular, positive deviations from the optimum can be weighted more, or less, severely than negative deviations in the policy maker's loss function. It is shown...

This paper develops a model where the value of the monetary policy instrument is selected by a heterogenous committee engaged in a dynamic voting game. Committee members differ in their institutional power and, in certain states of nature, they also differ in their preferred instrument value....