Not only the level of aggregate unemployment but also the properties of its dynamics are an important topic in macroeconomics and labor economics. Several models like e.g. matching models with endogenous job destruction explicitly predict an asymmetric pattern in the evolution of unemployment,...

We explore the implications of endogenous firm entry and exit for business cycle dynamics and optimal fiscal policy. We first show that when the firm exit rate is endogenous, negative technology shocks lead to reductions in the number of firms. Technology shocks therefore have additional effects...

We study an exchange economy with overlapping generations of consumers who derive utility from consuming a non-durable commodity and housing. A banking sector offers loans to finance housing. We provide a complete characterization of the equilibrium dynamics which alternates between an expansive...

In this paper, we estimate a small New Keynesian dynamic stochastic general equilibrium (DSGE) model for Germany for the period from 1975 to 1998 and use it to identify the structural shocks, which have driven the business cycle. For this purpose we apply indirect inference methods, that is we...

In an evolutionary approach to macroeconomics, the market disequilibrium dynamics resulting from structural change need to be properly represented at the aggregate level. As suggested by the late F.A.Hayek, a suitable equilibrium concept required to this end as a frame of reference, is that of a...

Credit constraints that link a private agent’s debt to market-determined prices embody a credit externality that drives a wedge between competitive and constrained socially optimal equilibria, inducing private agents to overborrow. The externality arises because agents fail to internalize the...