How the provision of unemployment benefits affects employment and unemployment is a debated issue. In this paper, we aim at complementing theoretical an

We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect theory, the consumers’ perceived utility losses from price increases are weighted more heavily than the perceived utility gains...

In this article, we empirically examine a hybrid New-Keynesian model with heterogeneous bounded rational agents who may adopt an optimistic or pessimistic attitude—so called animal spirits—toward future movements of the output and inflation gap. The...