By introducing search and matching frictions in both the labor and the credit markets into a cash in advance New Keynesian DSGE model, we provide a novel explanation of the incomplete pass-through from policy rates to loan rates. We show that this phenomenon is ineradicable if banks possess some...

Does capital-embodied technological change play an important role in shaping labor market outcomes? To address this question, we develop a model with vintage capital and search-matching frictions where irreversible investment in new vintages of capital creates heterogeneity in productivity among...

We explore the dynamic effects of news about a future technology improvement which turns out ex post to be overoptimistic. We find that it is difficult to generate a boom-bust cycle (a period in which stock prices, consumption, investment and employment all rise and then crash) in response to...

Building a model with three imperfect markets – goods, labor and credit – representing aproduct’s life-cycle, we find that goods market frictions drastically change the qualitative andquantitative dynamics of labor market variables. The calibrated model leads to a significantreduction in...

The Japanese business cycle from 1980-2007 portrays less contemporaneous correlation of labor with output than in the US and also tends to lead output by one quarter. A canonical real business cycle model cannot account for these facts. This paper uses the business cycle accounting method a la...

Building a model with three imperfect markets - goods, labor and credit - representing a product's life-cycle, we find that goods market frictions drastically change the qualitative and quantitative dynamics of labor market variables. The calibrated model leads to a significant reduction in the...

In this paper, we develop heterogeneous agent models with equilibrium unemployment to study the optimal taxation and labour wedge. We find that the the presence of profits plays an important role in the determination of both optimal tax policy and labour wedge. Judd-Chamley optimal zero capital...

We explore the dynamic effects of news about a future technology improvement which turns out ex post to be overoptimistic. We find that it is difficult to generate a boom-bust cycle (a period in which stock prices, consumption, investment and employment all rise and then crash) in response to...

Building a model with three imperfect markets – goods, labor and credit – representing a product's life-cycle, we find that goods market frictions drastically change the qualitative and quantitative dynamics of labor market variables. The calibrated model leads to a significant reduction in...

This paper develops a dynamic general equilibrium model where employers may avoid making social security contributions by offering some workers "secondary contracts". When calibrated using aggregate tax revenue data, the model delivers estimates of secondary "off the books" employment that are...