Labor Markets and the Macroeconomy: Theory, Evidence and Policy Implications

Jordi GALI (Director and Senior Researcher, Centre de Recerca en Economia Internacional / Professor, Department of Economics, Universitat Pompeu Fabra / Research Fellow, CEPR)

This workshop has provided a good snapshot of modern macroeconomic theory. A number of papers had a good mix of theory and empirics; modern macroeconomics requires a bit of both. We were presented with papers that feature sophisticated time series techniques and dynamic general equilibrium models. We were also presented with papers that emphasize deviations from ideal worlds: some of the papers featured frictions in labor markets, and others emphasized nominal rigidities. The last paper had an interesting application to a world with financial frictions. I think the papers we have heard are representative of current research in modern macroeconomics because they allowed us to ask meaningful questions about what monetary policy can do in order to dampen the consequences of frictions. Many questions remain unanswered, but we have raised them and set the scene for future collaborations.