Essays on labor market search, business cycles and monetary policy

The first essay develops a general equilibrium model integrating a theory of equilibrium unemployment into a monetary model with nominal price rigidities. The labor market displays search and matching frictions and de centralized wage bargaining. I study two alternative models of wage bargaining: efficient Nash bargaining and right-to-manage. Search and matching frictions generate unemployment in equilibrium. Wage bargaining introduces a microfounded real wage rigidity. I find that monetary policy shocks can explain important features of labor market fluctuations. A monetary expansion leads to a rise in job creation and to a hump-shaped decline in unemployment. Moreover, I show that decentralized wage bargaining reduces the elasticity of marginal cost with respect to output. The real wage rigidity dampens wage fluctuations and, to the extent that the wage is allocative, inflation fluctuations. These findings are consistent with recent evidence suggesting a low cyclicality of wages and inflation.; The second essay develops a general equilibrium model to explain a set of facts regarding job flows, unemployment and inflation dynamics. The model integrates a theory of equilibrium unemployment into a monetary model with nominal price rigidities and allows for endogenous job destruction. The model can explain the cyclical behavior of unemployment, job creation, job destruction and the joint fluctuations of the labor input along both the extensive and the intensive margin conditional on a shock to monetary policy. Allowing for variation of the labor input at the extensive margin leads to a significantly lower elasticity of marginal costs with respect to output. This helps to explain the sluggishness of inflation and the persistence of output after a monetary policy shock.