provides a natural interpretation for the dynamic inflation-unemployment relation found in the data. -- oil price shocks …

We develop a utility based model of fluctuations, with nominal rigidities, and unemployment. In doing so, we combine …-Mortensen-Pissarides model, with its focus on labor market frictions and unemployment. In developing this model, we proceed in two steps. We … effect on unemployment in the constrained efficient allocation. We then focus on the implications of alternative real wage …

provides a natural interpretation for the dynamic inflation - unemployment relation found in the data …

equilibrium is distorted, the gross efficiency losses from recessions and gains from booms may be large. Indeed, we find that the … major recessions involved large efficiency losses. These results hold for reasonable parameterizations of the Frisch …

associated with recessions, and (ii) the effectiveness of fiscal policy as a stabilization tool. The paper also discusses some …