Pascal Michaillat is a lecturer in the department of economics at the London School of Economics and Political Science. He received his Ph.D. in economics from the University of California. Berkeley in 2010, under the supervision of George Akerlof and Yuriy Gorodnichenko. Prior to this, he completed his undergraduate studies in France and received a M.Sc. in industrial organization and operations research from the University of California, Berkeley. His research focuses on unemployment and on policies related to unemployment, such as unemployment insurance and public employment. His research has been published in the American Economic Review and the American Economic Journal: Macroeconomics.
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In recent decades, advanced economies have experienced low and stable inflation and long periods of liquidity trap. We construct an alternative business-cycle model capturing these two features by adding two assumptions to a money-in-the-utility-function model: the labor market is subject to matching frictions, and real wealth enters the utility function. These assumptions modify the two core equations of the standard New Keynesian model