We analyze the interaction between committed monetary policy and discretionary fiscal policy in a model with public debt, endogenous government expenditures, distortive taxation and nominal rigidities. Fiscal decisions lack commitment but are Markovperfect. Monetary commitment to an interest...

Using administrative data from Germany, this paper analyzes the relation between wages and past and current labor market conditions. Specifically, it explores whether the data is more consistent with implicit contract models (Beaudry/DiNardo, 1991) or a matching model with on-the-job search and...

This paper analyzes the effects of different wage cyclicalities on labor market flow dynamics at the establishment level. We derive a model that allows for heterogeneous wage cyclicalities across firms over the business cycle and confront the theoretical results with the new AWFP dataset, which...

This paper studies the unemployment accelerator, a mechanism where workers directly affect the firms’ financial conditions, and, in turn, firms’ financial conditions feedback again to the real economy. The unemployment accelerator builds on two key assumptions: search frictions in the labor...

In this paper, we analyze the connection between value added, wages, and labor market ows at the establishment level. For this purpose, we first develop a simple model to illustrate the expected comovement of these variables. For the empirical analysis, we link the new German Administrative Wage...

This paper provides evidence for the impact of technology, labor supply, monetary policy and aggregate spending shocks on hours worked in the Euro area. The evidence is based on a vector autoregression identi?ed using sign restrictions that are consistent with both sticky price and real business...

In this paper we develop the Generalized Taylor Economy (GTE) in which there are many sectors with overlapping contracts of different lengths. In economies with the same average contract length, monetary shocks will be more persistent when longer contracts are present. We are able to solve the...

This paper incorporates search and matching frictions in the labor market into a New Keynesian model. In contrast to the literature, the labor market activity takes place in the (Calvo-staggered) price-setting sector. Matching frictions lead price-setting firms to negotiate wage rates with their...

Recently, a number of authors have argued that the standard search model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies, given shocks of a plausible magnitude. We use data on the cost of vacancy creation and cyclicality of wages to identify...

All else equal, higher wages translate into higher inflation. More rigid wages imply a weaker response of inflation to shocks. This view of the wage channel is deeply entrenched in central banks’ views and models of their economies. In this paper, we present a model with equilibrium...