A Search Phillips Curve A generalised search model to understand the way economic policies shape the transmission of shocks

A generalised search model with matching on product, labour and financial markets is presented in order to analyse the impact of market frictions on the pass-through of shocks. The model includes an endogenous demand for money that arises from matching frictions on the financial market. Moreover, price posting on retail markets allows to establish a forward-looking Search Phillips Curve. The model is estimated using Bayesian techniques on US data. The policy analysis illustrates the importance of financial market deregulation for a rapid pass-through of monetary policy shocks. Moreover, labour market policies in particular activation policies are shown to insulate employment from wage and technology shocks. Finally, increased product market competition has an ambiguous effect on the sacrifice ratio depending on whether entry rates are increased or exit probabilities.