This paper examines the effects of introducing a non Walrasian labour market into the "New Neoclassical Synthesis'' framework. A dynamic stochastic general equilibrium model is formulated, solved, and calibrated in order to evaluate its ability to replicate the main features of the Euro area...

This paper introduces right-to-manage bargaining into a labor search model with sticky prices instead of standard efficient bargaining and examines the Ramsey-optimal monetary policy. Without real wage rigidity, even when the steady state is inefficient, price stability is nearly optimal in...

Much recent research has focused on the development and analysis of extensions of the New Keynesian framework that model labor market frictions and unemployment explicitly. This chapter describes some of the essential ingredients and properties of those models, and their implications for...

Real wage rigidity is known to create a substantial trade-off between inflation and employment stabilization for monetary policy in New Keynesian models with search frictions on the labor market. This paper shows that, quantitatively, this finding hinges very much on the assumption of constant...