In a search and matching environment, this paper assesses a range of modeling setups against
macro evidence for the monetary transmission mechanism in the euro area. In particular, we
assess right-to-manage vs. efficient bargaining, flexible vs. sticky wages, interactions at the firm
level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and
endogenous job separation. Models with wage stickiness and right-to-manage bargaining or
with firm-specific labour imply a sufficient degree of real rigidity, and so can reproduce inflation
dynamics well. However, they imply too small a response on the employment margin. The other
model variants fit employment dynamics better, but then imply too little real rigidity and, so, too
volatile inflation, owing to strong responses of marginal wages and hours per employee. Further
sources of real rigidities - possibly from outside of the labour market - seem to be needed to
simultaneously explain the responses of wages, inflation and employment.