carlos thomas | London School of Economics and Political Science (original) (raw)
Papers by carlos thomas
Journal of Pediatrics, 2000
I analyze optimal monetary policy in an economy with search and matching frictions in the labor m... more I analyze optimal monetary policy in an economy with search and matching frictions in the labor market and staggered nominal wage and price contracts. In this framework, as opposed to the standard New Keynesian model, preset nominal wages need not have any effect on existing employment relationships. However, staggered bargaining of nominal wages distorts aggregate job creation and creates inefficient dispersion in hiring rates across firms. Targeting zero inflation (the optimal policy in the standard New Keynesian model) only magnifies these distortions. The optimal policy allows for non-zero inflation in response to real shocks, so as to reduce the rigidity of real wages. Quantitatively, the case against price stability as the sole goal of monetary policy turns out to be important.
Journal of Monetary Economics, 2009
This paper studies the effect of labor market reform, in the form of reductions in firing costs a... more This paper studies the effect of labor market reform, in the form of reductions in firing costs and unemployment benefits, on inflation volatility. With this purpose, we build a New Keynesian model with search and matching frictions in the labor market, and estimate it using Euro Area data. Qualitatively, changes in labor market policies alter the volatility of inflation in response to shocks, by affecting the volatility of the three components of real marginal costs (hiring costs, firing costs and wage costs). Quantitatively, we find however that neither policy is likely to have an important effect on inflation volatility, due to the small impact of changes in the volatility of the labor market on inflation dynamics.
Journal of Monetary Economics, 2008
I analyze optimal monetary policy in an economy with search and matching frictions in the labor m... more I analyze optimal monetary policy in an economy with search and matching frictions in the labor market and staggered nominal wage and price contracts. In this framework, as opposed to the standard New Keynesian model, preset nominal wages need not have any effect on existing employment relationships. However, staggered bargaining of nominal wages distorts aggregate job creation and creates inefficient dispersion in hiring rates across firms. Targeting zero inflation (the optimal policy in the standard New Keynesian model) only magnifies these distortions. The optimal policy allows for non-zero inflation in response to real shocks, so as to reduce the rigidity of real wages. Quantitatively, the case against price stability as the sole goal of monetary policy turns out to be important.
Series, 2010
This paper analyzes the determinants of Spain's macroeconomic ‡uctuations since the inception of ... more This paper analyzes the determinants of Spain's macroeconomic ‡uctuations since the inception of the euro in 1999, with a special attention to observed growth and in- ‡ation di¤erentials with respect to the rest of the European Monetary Union (EMU). For that purpose we estimate the Banco de España DSGE model of the Spanish economy and the rest of the Eurosystem (BEMOD). We …nd that observed di¤erentials are the result of a combination of asymmetric country-speci…c shocks (in particular, demand and productivity shocks for growth and cost-push shocks for in ‡ation) as well as asymmetric economic structure (especially lower nominal wage and price rigidities in Spain). Finally, we …nd that EMU membership has had a non-negligible e¤ect on observed di¤erentials. JEL codes: C11, C51, E17
We analyze optimal monetary policy in a model where borrowing is subject to collateral constraint... more We analyze optimal monetary policy in a model where borrowing is subject to collateral constraints and credit ‡ows are intermediated by a monopolistically competitive banking sector. We show that, under certain conditions and up to a second order approximation, welfare maximization is equivalent to stabilization of four goals: in ‡ation, output gap, the consumption gap between constrained and unconstrained consumers, and the distribution of the collateralizable asset between both groups. Following both productivity and creditcrunch shocks, the optimal monetary policy commitment implies a short-run trade-o¤ between these goals. Finally, such trade-o¤s become ampli…ed as banking competition increases, due to the increase in …nancial leveraging.
Journal of Pediatrics, 2000
I analyze optimal monetary policy in an economy with search and matching frictions in the labor m... more I analyze optimal monetary policy in an economy with search and matching frictions in the labor market and staggered nominal wage and price contracts. In this framework, as opposed to the standard New Keynesian model, preset nominal wages need not have any effect on existing employment relationships. However, staggered bargaining of nominal wages distorts aggregate job creation and creates inefficient dispersion in hiring rates across firms. Targeting zero inflation (the optimal policy in the standard New Keynesian model) only magnifies these distortions. The optimal policy allows for non-zero inflation in response to real shocks, so as to reduce the rigidity of real wages. Quantitatively, the case against price stability as the sole goal of monetary policy turns out to be important.
Journal of Monetary Economics, 2009
This paper studies the effect of labor market reform, in the form of reductions in firing costs a... more This paper studies the effect of labor market reform, in the form of reductions in firing costs and unemployment benefits, on inflation volatility. With this purpose, we build a New Keynesian model with search and matching frictions in the labor market, and estimate it using Euro Area data. Qualitatively, changes in labor market policies alter the volatility of inflation in response to shocks, by affecting the volatility of the three components of real marginal costs (hiring costs, firing costs and wage costs). Quantitatively, we find however that neither policy is likely to have an important effect on inflation volatility, due to the small impact of changes in the volatility of the labor market on inflation dynamics.
Journal of Monetary Economics, 2008
I analyze optimal monetary policy in an economy with search and matching frictions in the labor m... more I analyze optimal monetary policy in an economy with search and matching frictions in the labor market and staggered nominal wage and price contracts. In this framework, as opposed to the standard New Keynesian model, preset nominal wages need not have any effect on existing employment relationships. However, staggered bargaining of nominal wages distorts aggregate job creation and creates inefficient dispersion in hiring rates across firms. Targeting zero inflation (the optimal policy in the standard New Keynesian model) only magnifies these distortions. The optimal policy allows for non-zero inflation in response to real shocks, so as to reduce the rigidity of real wages. Quantitatively, the case against price stability as the sole goal of monetary policy turns out to be important.
Series, 2010
This paper analyzes the determinants of Spain's macroeconomic ‡uctuations since the inception of ... more This paper analyzes the determinants of Spain's macroeconomic ‡uctuations since the inception of the euro in 1999, with a special attention to observed growth and in- ‡ation di¤erentials with respect to the rest of the European Monetary Union (EMU). For that purpose we estimate the Banco de España DSGE model of the Spanish economy and the rest of the Eurosystem (BEMOD). We …nd that observed di¤erentials are the result of a combination of asymmetric country-speci…c shocks (in particular, demand and productivity shocks for growth and cost-push shocks for in ‡ation) as well as asymmetric economic structure (especially lower nominal wage and price rigidities in Spain). Finally, we …nd that EMU membership has had a non-negligible e¤ect on observed di¤erentials. JEL codes: C11, C51, E17
We analyze optimal monetary policy in a model where borrowing is subject to collateral constraint... more We analyze optimal monetary policy in a model where borrowing is subject to collateral constraints and credit ‡ows are intermediated by a monopolistically competitive banking sector. We show that, under certain conditions and up to a second order approximation, welfare maximization is equivalent to stabilization of four goals: in ‡ation, output gap, the consumption gap between constrained and unconstrained consumers, and the distribution of the collateralizable asset between both groups. Following both productivity and creditcrunch shocks, the optimal monetary policy commitment implies a short-run trade-o¤ between these goals. Finally, such trade-o¤s become ampli…ed as banking competition increases, due to the increase in …nancial leveraging.