macroeconomic effects of US tariffs imposed on one country member of the euro area (EA), and the rest of the world (RW). The model …-specific labour markets with search-and-matching frictions. Our main results are as follows. First, tariffs produce recessionary … effects in each country. Second, if the ELB holds, then the tariff has recessionary effects on the whole EA, even if it is …

. Using US and European data from 1970 to 1998 our parameter estimates reveal that (i) there is relatively more inertia in … price-setting in Europe; (ii) wage contracts last longer in the US; (iii) the extent of backward-looking behaviour in price … and wage setting is statistically significant but small in both the US and Europe; and (iv) significant habits effects are …