This paper studies the effects of protectionism as a business cycle instrument. In normal times, protectionism reduces international trade, distorts production and reduces output. However, in a liquidity trap protectionism lowers the real interest rate because inflation goes up while the nominal...

Trade liberalization can imply slow and long adjustment processes. Taking account of these adjustment processes can change the evaluation of trade policy, especially when policy makers care more about the next couple of years than the infinite future. In this paper I analyze the setting of...

We study the design of optimal monetary policy in a New Keynesian model with labor turnover costs in which wages are set according to a right to manage bargaining where the firms' counterpart is given by currently employed workers. Our model captures well the salient features of European labor...

In this paper we propose a novel way to model the labor market in the context of a New-Keynesian general equilibrium model, incorporating labor market frictions in the form of hiring and firing costs. We show that such a model is able to replicate many important stylized facts of the business...

It is common knowledge that the standard New Keynesian model is not able to generate a persistent response in output to temporary monetary shocks. We show that this shortcoming can be remedied in a simple and intuitively appealing way through the introduction of labor turnover costs (such as...

We analyze the implications of changes in the trend growth rate for optimal monetary policy in the presence of search and matching unemployment. We show that trend growth in itself does not generate a trade-off for the monetary authority, but that it interacts importantly with the inefficiencies...