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...

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...

We explore the role of real wage dynamics in a New Keynesian business cycle model with search and matching frictions in the labor market. Both job creation and destruction are endogenous. We show that the model generates counterfactual inflation and labor market dynamics. In particular, it fails...

This paper reviews recent approaches to modeling the labour market and assesses their implications for in.ation dynamics through both their effect on marginal cost and on price-setting behaviour. In a search and matching environment, we consider the following modeling setups: right-to-manage...

This paper provides a survey of the recent literature about firing costs and discusses the transmission channels of firing costs in a partial equilibrium context. In addition, we expand our analysis two types of firing costs in a New Keynesian model with purely endogenous separations. We further...

This paper introduces staggered right-to-manage wage bargaining into a New Keynesian business cycle model. Our key result is that the model is able to generate persistent responses in output, inflation, and total labor input to both neutral technology and monetary policy shocks. Furthermore, we...

We build a New Keynesian business-cycle model with rich household heterogeneity. A central feature is that matching frictions render labor-market risk countercyclical and endogenous to monetary policy. Our main result is that a majority of households prefer substantial stabilization of...

A labor matching model with nominal rigidities can match short-run movements in labor's share with some success. However, it cannot explain much of the behavior of employment, vacancies, and job flows in postwar US data without resorting to additional shocks beyond monetary policy and...

This paper analyzes the effects of different labor market institutions on inflation and output volatility. The eurozone offers an unprecedented experiment for this exercise: since 1999, no national monetary policies have been implemented that could account for volatility differences across...

This paper introduces productivity-dependent firing costs into an otherwise standard endogenous separations matching model. We suggest an alternative to the standard fix cost approach and account for empirical evidence emphasizing that firing costs vary across workers. We show that the model...