The theoretical literature on business cycles predicts a positive investment response to productivity improvements, a prediction we question from theoretical and empirical perspectives. We show that a short-term negative response of investment to a positive technology shock is consistent with a...

We study the e¤ects of underground activities on labour market dynamics in a RBC model with search frictions in the labor market, bargained wage and quadratic hiring costs. Underground activities, which allow agents to (partially) evade taxes, are modelled through a moonlighting production...

The interplay of imperfections in several markets is the new frontier of New Keynesian DSGE model research. Following a suggestion put forward by Wasmer and Weil (2004) in a partial equilibrium environment, we introduce search and matching frictions in both the labour and the financial markets...

The theoretical literature on business cycles predicts positive factor inputs responses to productivity shocks. In this work we argue that, once conditional correlations are taken into account, hours worked and investment decline temporarily following a positive technology shock. First, we...

We apply a three-tier hierarchical model of regulation, developed along the lines of Laffont and Tirole (1993), to an adverse selection problem in the corporate bond market. The bank brings the bonds to the market and informs the potential buyers about the bond risks; a unique benevolent public...

We study the effects of COVID-19, and the ensuing lockdown and fiscal policies, on the welfare of different age-groups within a life-cycle macroeconomic scheme, adapted from Gertler (1999), where the pandemic is represented as a shock to the mortality rate. We obtain two main results. First, we...

By introducing search and matching frictions in both the labor and the credit markets into a cash in advance New Keynesian DSGE model, we provide a novel explanation of the incomplete pass-through from policy rates to loan rates. We show that this phenomenon is ineradicable if banks possess some...

This paper develops a simple New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model with rule-of-thumb consumers and external habits. Our theoretical model has a closed-form solution which allows the analytical derivation of its dynamical and stability properties. These properties are...