Do business cycle fluctuations leave a role and a welfare case for an active stabilization policy by means of fiscal policy instruments? We address this issue in a two-sector open economy model with price-taking firms and imperfect competition in the labour market. Fiscal policies are shown to...

The system of wage setting in the Nordic countries is often regarded as highly centralised, contributing to considerable real wage flexibility. This view has been questioned, as the sizeable wage drift may offset the effect of the central negociations. This paper presents evidence from the four...

We examine fiscal adjustment episodes in 24 OECD countries in order to find how austerity affects debt and growth, and whether the choice of fiscal instrument matters for the results. Inuential existing studies argue that spending cuts are more likely to successfully reduce debt and enhance...

We investigate empirically the effect of government purchases on unemployment in 20 OECD countries, for the period 1960-2007. Compared to earlier studies we use a data set with more variation in unemployment, and which allows for controlling for a host of factors that influence the effect of...

The last 20 years, the importance of a number of behavioral features have been widely accepted within economics, and they are now regularly included in standard macro models. Where have this development led us? I argue that the insights from behavioral economics have led to important progress in...

We develop a model of credit rating agencies (CRAs) based on reputation concerns. Ratings a ffect investors' choice and, thereby, also issuers' access to funding and default risk. We show that in equilibrium - the informational content of credit ratings is inferior to that of CRAs' private...

Iceland is recovering after a severe crisis, which is an impressive turnaround by any standard. However, the improvement of the economy has led to a rising wage growth, which, if it continues, may lead to another boom-bust cycle. Persistent high wage growth is likely to induce the central bank...

A number of recent studies have documented extensive downward nominal wage rigidity (dnwr) for job stayers in many oecd countries. However, dnwr for individual workers may induce downward rigidity or 'a floor' for the aggregate wage growth at positive or negative levels. Aggregate wage growth...

How will the commitment to price stability affect labour market rigidities in the European Monetary Union? I explore a model where firms choose between fixed wage contracts (where the employer cannot lay off the worker, and the wage can only be changed by mutual consent), or contracts where...

This paper explores the existence of downward real wage rigidity (drwr) in 19 oecd countries, over the period 1973–1999, using data for hourly nominal earnings at industry level. Based on a nonparametric statistical method, which allows for country and year specific variation in both the...