New Keynesian DSGE models propose a dynamic and expectational version of the old IS-LM paradigm. Acknowledging that the Taylor rule as a substitute for the LM-curve has its merits we show that standard DSGE models do not model how the central bank achieves its targets. In filling this gap we...

We incorporate a wage bargaining structure in a dynamic general equilibrium model and show how this feature changes short and long-run properties of equilibria compared with a perfectly competitive setting. We discuss how employment, capital, and income shares respond to wage setting shocks and...

In this paper the climate change effect is an unforeseen earth temperature level above which a negative externality on technology and hence on society's welfare is exerted. We use a dynamic overlapping generations model to develop a positive analysis of the growth path of an economy with the...

We analyze the interaction between risk sharing and capital accumulation in a stochastic OLG model with production. We give a complete characterization of interim Pareto optimality. Our characterization also subsumes equilibria with a PAYG social security system. In a competitive equilibrium...

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 consider the implications of relative consumption externalities in the Blanchard-Yaari overlapping generations framework. Unlike most of the macroeconomic literature that studies this question, the differences between agents, and, thus, in their relative position, persist in...

We consider a dynamic general equilibrium model with collective wage bargaining and investigate how unemployment dynamics are affected by two types of budgetary policies. In line with traditional reasoning, a balanced-budget rule amplifies fluctuations in the short run, whereas an...

We consider the properties of two monetary policy rules (monetary targeting, Taylor-type interest rate rule) in an intertemporal equilibrium model with capital accumulation and two outside assets (government bonds, fiat money). The paper shows that the long-run behaviour of the economy depends...

We consider the properties of two monetary policy rules ("strict inflation targeting", "constant money growth rule") in an intertemporal equilibrium model with flexible prices in which monetary policy is "active", while fiscal policy is "passive". Specifically, we assume that the fiscal agent...

The German Income Tax Reform 2000, which announced a reduction in income tax rates to be implemented in a series of three stages, was welcomed by the public as a step towards unleashing lurking growth potentials. Nonetheless, in the course of the year 2001 a dispute arose, centering around the...