In this paper, I argue that labor market flexibility, through flexible jobs, serves as an important policy tool for stabilizing the economy. Motivated by the empirical evidence, I build a tractable heterogeneous-agent version of the New Keynesian model in which regular and flexible jobs coexist. I then estimate the model using Bayesian techniques to match salient features of the European labor market and argue that the interaction between incomplete markets and the lower unemployment risk fluctuations associated with a labor market with flexible jobs generates a qualitatively important stabilization effect on the economy.

This paper utilizes a comprehensive worker-firm panel for the Netherlands to quantify the impact of ICT capital-skill complementarity on the finance wage premium after the Global Financial Crisis. We apply additive worker and firm fixed-effect models to account for unobserved worker- and firm-heterogeneity and show that firm fixed-effects correct for a downward bias in the estimated finance wage premium. Our results indicate a sizable finance wage premium for both fixed- and full-hourly wages. The complementarity between ICT capital spending and the share of high skill workers at the firm-level reduces the full-wage premium considerably and the fixed-wage premium almost entirely.

We develop a small open economy DSGE model to study the macro welfare effects of flex labor contracts for an economy in a currency union. The framework exhibits two sectors, a fixed sector and a flex sector. The fixed sector offers contracts that exhibit rigidities in working-hours and wages while the flex sector offers flex contracts in both dimensions. We find that the flex sector has a welfare-enhancing role in accommodating shocks, if the fixed sector's hour adjustment exhibits a high degree of rigidity; and moreover, the presence of the flex sector reduces the desirability of rigid wages in the fixed sector. The welfare analysis also reveals an optimal flex sector size. With the baseline parameterization, a flex sector of 20% of the overall employment maximizes the macro welfare. Our results have important policy implications for a wide range of countries in European-Monetary-Union - characterized by growing and large flex sectors.

In this paper, we identify and quantify the importance of endogenous peer effects in the interbank market, allowing for varying degrees of intensity of these peer effects. We base our analysis on a unique dataset that includes all interbank loans that have taken place between 15 banks in the Chilean interbank market representing more than 95% of the market between 2009 and 2016. This approach contrasts sharply with the geographical definition of peers used by most of the literature. As an application of our model, we examine an episode of liquidity shortage experienced by one Chilean bank in the interbank market, with the lenses of our model. We show evidence consistent with a herding behavior of the lender banks which, according to our model, were peers of the stressed bank.

This paper proposes a framework to identify the structure of a financial network and its evolution over time, and presents an application to an interbank market with complete actual data. The framework is based on a methodology popular in the social network literature – stochastic blockmodeling – which, we argue, is more general, transparent and rewarding in terms of results than other proposed methodologies. In particular, it allows us to identify the presence of multiple cores and peripheries as well as the different forms of interaction between them. We find that such a varied core–periphery structure exists in almost all periods for the different instruments analyzed. In the case of term deposits, which account for two-thirds of interbank exposures, we find that, far from being static, the structure underwent a transition in the period 2009–15, with the core increasing its size. We also show that facts revealed by our approach cannot be observed in the metrics commonly used to describe networks. Finally, we describe how the elements identified by our method can be used to single out sources and channels of transmission of systemic risk in a network of banks.

In this study we provide evidence regarding the relationship between the Chilean peso carry trade and currency crashes of the peso against other currencies. Using a rich dataset containing information from the local Chilean forward market, we show that speculation aimed at taking advantage of the recently large interest rate differentials between the peso and developedcountry currencies has led to several episodes of abnormal turbulence, as measured by the exchange-rate distribution’s skewness coefficient. In line with the interpretative framework linking turbulence to changes in the forward positions of speculators, we find that turbulence is higher in periods during which measures of global uncertainty have been particularly high.

Este trabajo presenta por primera vez una caracterización del tamaño, los instrumentos y la estructura de interconexiones del mercado interbancario chileno, entregando una descripción única de la evolución de dichas dimensiones en el tiempo y por instrumento. La importancia de contar con esta información radica en que las implicancias sistémicas de una situación de estrés en una institución financiera está determinada por la estructura (Acemoglu et al., 2015) y la complejidad (Caballero y Simsek, 2013) de las interconexiones del sistema financiero. Por lo tanto, tal como argumenta Yellen (2013), más y mejor información sobre las interconexiones entre instituciones financieras son clave, ya que esta permite identificar cómo una situación de estrés en una parte del sistema podría propagarse por el sistema financiero y terminar afectando a una parte importante del mismo.