We use a standard quantitative business cycle model with nominal price and wage rigidities to estimate two measures of economic inefficiency in recent U.S. data: the output gap (the gap between the actual and efficient levels of output) and the labor wedge (the wedge between households' marginal...

We use an estimated monetary business cycle model with search and matching frictions in the labor market and nominal price and wage rigidities to study four countries (the U.S., the U.K., Sweden, and Germany) during the financial crisis and the Great Recession. We estimate the model over the...

We study the importance of financial markets for (un)employment fluctuations in a model with searching and matching frictions where firms issue debt under limited enforcement. Higher debt allows employers to bargain lower wages which in turn increases the incentive to create jobs. The...