Fair prices & fair wages: implications for macroeconomic dynamics in closed & open economies

In this dissertation, I present five dynamic general equilibrium models. The distinguishing feature of these models is that they incorporate reciprocal altruistic behavior into an otherwise standard New Keynesian framework. In particular, I extend the New Keynesian model such that the assumed price and wage formation is line with the facts that recent empirical research assessed for price and wage setting behavior of firms and workers. In Chapter 2, I study an economy where a contractionary (expansionary) monetary policy shock gives rise to a more (less) frequent price adjustment. In Chapter 3, I analyze the comovements of employment, wages, and inflation with output, paying particular attention to the lead-lag relation between inflation and output. In Chapters 4 and 5, I analyze the impact of an increase in international trade in financial assets on labor market volatility and on the effectiveness of fiscal policy, respectively. In Chapter 6, I analyze the dynamic effects of monetary policy and technology shocks, with a focus on real exchange rate movements, under different assumptions for market imperfections and completeness.

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