Abstract

In light of the recession triggered by the recent financial and sovereign debt crises, understanding how the macro economy works has arguably never been more important. Using calibrated or estimated (Dynamic Stochastic) General Equilibrium models, this project addresses key macroeconomic questions that have arisen in the aftermath of the crisis.

A first set of papers focus on long run, structural issues. Low economic growth and permanently high unemployment remain key concerns. In a first project, the Irish growth miracle 1985-2005 is contrasted to the mediocre performance of Spain during the same period, focusing on differences in local organizational capital that facilitates the adoption of new technology and new ideas. An important driving force of structural unemployment is geographical mismatch. A second project addresses gross migrations flows within countries.

A second set of papers analyse stabilization policies and short-term performance. Two of the papers within the project focus on such unconventional monetary policy measures and yet another two deal with fiscal policy. A central theme is the fundamental issue of why monetary policy has the observed real effects on the economy and the exact type of price rigidity in the economy is studied extensively. The project will also address the effects of so-called forward guidance in DSGE models and the relationship between government bonds and market liquidity.