The recent economic events driven by the great financial crisis of 2007-08 has challenged some "dogma", highlighting various limits and drawbacks of current paradigms. The crisis showed the limitations of monetary policy and led to a revaluation of what levels of public debt can be considered safe. This volume aims to refresh the debate on some important long-run macroeconomic issues from new and fresh perspectives. Theoretical Foundations of Macroeconomic Policy raises a number of questions relating to the challenges faced by macroeconomic theory and policies. The common line is the long run and policy perspective. The first part of the book is devoted to the theory of growth and productivity. The second part concentrates on long-run effects of fiscal and monetary policy. Specifically, topics investigated by the international range of authors are the theory of optimal growth, the productivity policies and production function estimations, demand- vs. supply- driven growth, optimal debt default and the incompleteness of financial markets, the long-run optimal inflation target and its relationship with public finance, the long term effects of government budget constraints on growth, and effect on optimal policies in non-market clearing environment. The book will be of interest to postgraduates, researchers, and academics studying macroeconomics and fiscal policies.

This book is one of the ?nal products of a research project on the effects of market imperfectionson economic behavior and decisions. The project was put together by four Italian universities (Universita ' di Roma "Tor Vergata" and "La Sapienza" U- versita ' Cattolica del Sacro Cuore - Piacenza and the Universita ' di Urbino "Carlo Bo") in 2005 and funded by the Italian Ministry of Higher Education and Research for the period 2006-2007. The research title of the project "Corporate governance, ?nancial systems and ?rms' performances" was indicative of its agenda: to inv- tigate the role of market imperfections and their interactions on ?rms' decisions. In 2006 (May 12) the research group held the ?rst conference at the Universita ' di Urbino where intermediate results were ?rst presented and discussed with o- standing scholars from US, UK, and Italian universities, and the European Central Bank. The book reproduces the papers presented at the Universitad ' iRoma"La Sapienza" conference (May 16-17 2008) and is organized in two parts. The ?rst one discusses imperfectionsthat are mainly related to the working of ?nancial m- kets. The second part includes contributions which focus on different topics of real market imperfections. We wish to thank Steve Nickell, Philip Vermeulen and all the participants at the Urbino and Rome conferences who made both events extremely productive with their scienti?c contributions. We are especially grateful to Bob Chirinko who p- ticipatedinbothconferencesandconstantlyencouragedustocarryoutourscienti?c project on the economics of imperfect markets.

The recent economic events driven by the great financial crisis of 2007-08 has challenged some "dogma", highlighting various limits and drawbacks of current paradigms. The crisis showed the limitations of monetary policy and led to a revaluation of what levels of public debt can be considered safe. This volume aims to refresh the debate on some important long-run macroeconomic issues from new and fresh perspectives. Theoretical Foundations of Macroeconomic Policy raises a number of questions relating to the challenges faced by macroeconomic theory and policies. The common line is the long run and policy perspective. The first part of the book is devoted to the theory of growth and productivity. The second part concentrates on long-run effects of fiscal and monetary policy. Specifically, topics investigated by the international range of authors are the theory of optimal growth, the productivity policies and production function estimations, demand- vs. supply- driven growth, optimal debt default and the incompleteness of financial markets, the long-run optimal inflation target and its relationship with public finance, the long term effects of government budget constraints on growth, and effect on optimal policies in non-market clearing environment. The book will be of interest to postgraduates, researchers, and academics studying macroeconomics and fiscal policies.

This book is one of the ?nal products of a research project on the effects of market imperfectionson economic behavior and decisions. The project was put together by four Italian universities (Universita ' di Roma "Tor Vergata" and "La Sapienza" U- versita ' Cattolica del Sacro Cuore - Piacenza and the Universita ' di Urbino "Carlo Bo") in 2005 and funded by the Italian Ministry of Higher Education and Research for the period 2006-2007. The research title of the project "Corporate governance, ?nancial systems and ?rms' performances" was indicative of its agenda: to inv- tigate the role of market imperfections and their interactions on ?rms' decisions. In 2006 (May 12) the research group held the ?rst conference at the Universita ' di Urbino where intermediate results were ?rst presented and discussed with o- standing scholars from US, UK, and Italian universities, and the European Central Bank. The book reproduces the papers presented at the Universitad ' iRoma"La Sapienza" conference (May 16-17 2008) and is organized in two parts. The ?rst one discusses imperfectionsthat are mainly related to the working of ?nancial m- kets. The second part includes contributions which focus on different topics of real market imperfections. We wish to thank Steve Nickell, Philip Vermeulen and all the participants at the Urbino and Rome conferences who made both events extremely productive with their scienti?c contributions. We are especially grateful to Bob Chirinko who p- ticipatedinbothconferencesandconstantlyencouragedustocarryoutourscienti?c project on the economics of imperfect markets.

What is the effect of employment protection legislation (EPL) on labor market outcomes? Conventional wisdom suggests that differences in labor market conditions can be explained by differences in EPL, so that different performances of U.S. and European labor markets depend on different degree of strictness of EPL. In this book we introduce the alternative view that the strictness of EPL depends on the labor market conditions, and investigate the consequences of this "reverse" causality nexus on labor market performance. The intuition is straightforward: when the level of economic activity is low, the costs of employment protection are higher, and EPL appears stricter than in economically healthier conditions. A relevant implication of this result is that labor market performance is the variable that moves the economic system towards a higher or lower level of rigidity in terms of job protection. Therefore, there is a reverse causality between EPL and labor market outcomes: it is not labor market rigidities that cause poor labor market performance, but rather, it is labor market conditions that cause the degree of rigidities of the labor market.