German labor market reforms in the 1990s and 2000s are generally believed to have driven the large increase in the dispersion of current account balances in the Euro Area. We investigate this hypothesis quantitatively. We develop an open economy New Keynesian model with search and matching...

German labor market reforms in the 1990s and 2000s are generally believed to have driven the large increase in the dispersion of current account balances in the Euro Area. We investigate this hypothesis quantitatively. We develop an open economy New Keynesian model with search and matching...

We analyze the sources of current account fluctuations for the G6 economies. Based on Bergin and Sheffrin’s (2000) two-goods inter-temporal framework, we build a SVAR model including the world real interest rate, net output, real exchange rate, and the current account. The theory model allows...

DSGE models are typically estimated assuming the existence of certain structural shocks that drive macroeconomic fluctuations. We analyze the consequences of introducing nonfundamental shocks for the estimation of DSGE model parameters and propose a method to select the structural shocks driving...

DSGE models are typically estimated assuming the existence of certain primal shocks that drive macroeconomic fluctuations. We analyze the consequences of estimating shocks that are \non-existent" and propose a method to select the primal shocks driving macroeconomic uncertainty. Forcing these...

The New-Keynesian transmission mechanism of monetary policy has clear implications for the behavior of the labor share. In the basic version of the model, the labor share is negatively related to the price markup and hence is pro-cyclical conditional on monetary policy shocks. However, little...

We investigate the time variation in the correlation between hours and technology shocks using a structural business cycle model. We propose an RBC model with a Constant Elasticity of Substitution (CES) production function that allows for capital- and labor-augmenting technology shocks. We...

The Great Recession has inspired renewed interest in analyzing the behaviour of the economy during recession episodes, and how these temporary events can shape the productive structure of the economy for long periods. Most of the existing literature focuses on recessions at the aggregate level....

Do sector-specific factors common to all countries play an important role in explaining business cycle co-movement? We address this question by analyzing international co-movements of value added (VA) growth in a multi-sector dynamic factor model. The model contains a world factor,...

The reaction of hours worked to technology shocks represents a key controversy between RBC and New Keynesian explanations of the business cycle. It sparked a large empirical literature with contrasting results. We demonstrate that, with a more general and data coherent supply and production...