This DPhil thesis is a collection of three theoretical and empirical papers studying labor markets in several advanced economies. Two chapters examine the relationship between the banking sector and the labor market in the US and the UK, while one evaluates a policy that has been proposed to help labor markets in the Euro Area adjust to economic shocks. In the first chapter, I develop a New Keynesian DSGE model that integrates a banking sector subject to moral hazard with a standard random search model of the labor market. I estimate the model using US data and study the role of the banking sector in determining labor market fluctuations. In the second chapter, I estimate a structural VAR model of the UK and US economies and identify bank lending shocks using a mix of sign and short-run exclusion restrictions. Consistent with the predictions of the DSGE model, an expansionary loan supply shock decreases job-destruction and increases job-creation, reducing the unemployment rate persistently. Bank lending shocks are also important drivers of labor market fluctuations, particularly during the Great Recession. Lastly, in the third chapter, I calibrate to the Euro Area a currency union DSGE model to evaluate the aggregate properties of European Unemployment Insurance (EUI). I find that EUI cannot contemporaneously stabilize the monetary union and achieve convergence in regional unemployment and inflation rates.

The global financial crisis that started in the USA affected several countries around the world. This study focuses on only three countries; the USA, Sweden, and Italy, which are examples of economies with three different labor market models. The purpose of this study is to investigate if and in that case how Okun's law was affected by the global financial crisis in the three countries’ labor market models and if there are any differences in the correlations before and after the global financial crisis. Okun’s difference version was used in this study. Quarterly time series data was used in this study during the time period 1985-2019. The Chow test was used to test the hypothesis. The results show that the global financial crisis affected Okun’s law after the crisis in all three countries. The USA, Sweden, and Italy were affected differently