Three Unemployment Rates Relevant To Monetary Policy

We construct a Neo-Keynesian model, with a standard utility specification and nominal rigidities, in which monopolistic firms have employment-related norms and the wage bargaining power is variable. Due to norms, firms hire workers in excess of the number of employees required by technology. Workers in excess are efficiency reserves of the firms. We present the implications for the unemployment-inflation trade-off. We show that, with norms and variable bargaining power, besides the natural rate of unemployment, the unemployment rate at which firms establish/cancel norms, and the one at which the labor bargaining power reach maximum are relevant to decision making We show that, in the presence of norms, the response of the unemployment rate to a change in the monetary policy stance is relatively large, and temporarily concomitant increases in the unemployment rate and inflation can occur.

Coordination of fiscal policies at European level

Taxation is one of the key concerns of each state and one of the direct ways to influence economic development at European level. This paper aims to make an analysis of the development stage of coordination of fiscal policies of European countries, highlighting the crucial role that a uniform fiscal policy has at European level on the stability and economic development. Moreover, there are envisaged the efforts of the EU countries to reform and harmonize fiscal systems for the passage, in the near future, to a unified fiscal system. To this end there are analytically addressed the requirements of the Stability and Growth Pact of the European Union. Furthermore, we intend to make a summary of the reforms undertaken and of the directions of the budgetary- fiscal reform envisaged at European level.fiscal policy, tax system, convergence

Equilibrium Mispricing in a Capital Market with Portfolio Constraints

This paper develops a general equilibrium, continuous time model where portfolio constraints generate mispricing between redundant securities. Constrained consumption-portfolio optimization techniques are adapted to incorporate redundant, possibly mispriced, securities. Under logarithmic preferences, we provide explicit conditions for mispricing and closed-form expressions for all economic quantities. Existence of an equilibrium where mispricing occurs with positive probability is verified in a specific case. In a more general setting, we demonstrate the necessity of mispricing for equilibrium when agents are heterogeneous enough. The construction of a representative agent with stochastic weights allows us to characterize prices and allocations, given mispricing occurs.