This minicourse presents basic facts about business cycles. It then develops a matching model to explain these business-cycle facts. Finally, it explains how monetary policy and government spending should be designed to tame business cycles.
This paper explains why a wave of immigration reduces the employment rate of native workers, and why this reduction is larger in bad times. Yet, immigration improves native welfare when the labor market is inefficiently tight, because it helps firms to recruit.
This graduate course presents various matching models of economic slack. It uses them to study business-cycle fluctuations; Keynesian, classical, and frictional unemployment; optimal monetary policy and the zero lower bound; and optimal government spending.
This paper develops a policy-oriented business-cycle model with fluctuating unemployment, stable inflation, and long zero-lower-bound episodes. The innovations are that producers and consumers meet through a matching function, and wealth enters the utility function.
This graduate course presents various matching models of unemployment. It uses them to study unemployment fluctuations, job rationing, unemployment gap, and labor market policies—minimum wage, payroll tax, public employment, and unemployment insurance.
This paper shows that when unemployment is inefficient, optimal public expenditure deviates from the Samuelson rule to reduce the unemployment gap. Optimal stimulus spending depends on the unemployment gap, unemployment multiplier, and an elasticity of substitution.
This undergraduate course introduces macroeconomic concepts—such as GDP and inflation—and covers the IS-LM model of business cycles, matching model of unemployment, Phillips curve, Malthusian model of growth, and Solowian model of growth.
This paper explores how the optimal replacement rate of unemployment insurance varies over the business cycle in the United States. It finds that the optimal replacement rate is countercyclical, just like the actual replacement rate.
This paper develops a theory of optimal unemployment insurance in matching models. It derives a sufficient-statistic formula for optimal unemployment insurance, which is useful to determine the optimal cyclicality of unemployment insurance.
This paper develops a model of unemployment fluctuations. The innovation is to represent the labor and product markets with a matching structure. The model simultaneously features Keynesian unemployment, classical unemployment, and frictional unemployment.
This paper develops a New Keynesian model in which the government multiplier doubles when the unemployment rate rises from 5% to 8%. The multiplier is so countercyclical because in bad times, on the labor market, job rationing dwarfes matching frictions.
This paper proposes a matching model of the labor market with job rationing: unemployment does not disappear in the absence of matching frictions. In recessions, job rationing drives the rise in unemployment, whereas matching frictions contribute little to unemployment.