Moon, Weh-Sol (2011): Business cycle with nominal contracts and search frictions.
Download (299kB) | Preview
This paper examines a dynamic stochastic general equilibrium (DSGE) model containing exible prices, search frictions and nominal wage contracts. It is assumed that the nominal hourly wage rate and the hours of work are jointly determined, so-called efficient bargaining, for each period. The frictional labor markets reasonably reflect the volatility of real variables and the fact that productivity is no longer countercyclical. As contract length increases, the volatilities of the unemployment rate and the vacancy rate increase sharply, but those of output and total hours worked do not appreciably change.
|Item Type:||MPRA Paper|
|Original Title:||Business cycle with nominal contracts and search frictions|
|Keywords:||Business Cycles; Labor Market Frictions; Nominal Wage Contracts|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity
J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Labor Contracts
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J64 - Unemployment: Models, Duration, Incidence, and Job Search
|Depositing User:||Weh-Sol Moon|
|Date Deposited:||20. Jun 2011 16:26|
|Last Modified:||25. Apr 2015 02:29|
Andolfatto, David (1996) Business cycles and labor-market search. American Economic Review 86, 112-132.
Bils, Mark and Yongsung Chang (2003) Welfare costs of sticky wages when effort can respond. Journal of Monetary Economics 50, 311-330.
Blanchard, Olivier J. and Stanley Fischer (1989) Lectures on Macroeconomics. Cambridge, MA: MIT Press.
Blanchard, Olivier J. and Jordi Gali (2010) Labor markets and monetary policy: a new Keynesian model with unemployment. American Economic Journal: Macroeconomics 2, 1-30.
Chang, Yongsung and Sun-Bin Kim (2006) From individual to aggregate labor supply: a quantitative analysis based on a heterogeneous agent macroeconomy. International Economic Review 47, 1-27.
Cho, Jang-Ok (1993) Money and business cycle with one-period nominal contracts. Canadian Journal of Economics 26, 638-659.
Cho, Jang-Ok, and Thomas F. Cooley (1995) The business cycle with nominal contracts. Economic Theory 6, 13-33.
Cho, Jang-Ok, Thomas F. Cooley, and Louis Phaneuf (1997) The welfare cost of nominal wage contracting. Review of Economic Studies 64, 465-484.
Christoffel, Kai and Keith Kuester (2008) Resuscitating the wage channel in models with unemployment fuctuations. Jounal of Monetary Economics 55, 865-887.
Christoffel, Kai, James Costain, Gregory de Walque, Keith Kuester, Tobias. Linzert, Stephen Millard, and Olivier Pierrard (2009) Wage inflation and employment dynamics with labour market matching. Documentos de Trabajo No. 0918, Banco de Espana.
Cole, Harold L. and Richard Rogerson (1999) Can the Mortensen-Pissarides matching model match the business-cycle facts? International Economic Review 40, 933-959.
Cooley, Thomas F. and Vincenzo Quadrini (1999) A Neoclassical model of the Phillips curve relation. Journal of Monetary Economics 44, 165-193.
Gali, Jordi (2010) Monetary policy and unemployment. In Benjamin M. Friedman and Michael Woodford (ed.), Handbook of Monetary Economics, pp. 487-546. Amsterdam: Elsevier.
Gertler, Mark, Luca Sala, and Antonella Trigari (2008) An estimated monetary DSGE model with unemployment and staggered nominal wage bargaining. Journal of Money, Credit and Banking 40, 1713-1764.
Gertler, Mark and Antonella Trigari (2009) Unemployment fluctuations with staggered Nash wage bargaining. Journal of Political Economy 117, 38-86.
Hall, Robert E. (2005) Employment fluctuations with equilibrium wage stickiness. American Economic Review 95, 50-65.
Ireland, Peter N. (2003) Endogenous money or sticky prices? Journal of Monetary Economics 50, 1623-1648.
Janko, Zuzana (2008) Nominal wage contracts, labor adjustment costs and the business cycle. Review of Economic Dynamics 11, 434-448.
Krause, Michael U. and Thomas A. Lubik (2007) The (ir)relevance of real wage rigidity in the new Keynesian model with search frictions. Journal of Monetary Economics 54, 706-727.
Merz, Monika (1995) Search in the labor market and the real business cycle. Journal of Monetary Economics 36, 269-300.
Mortensen, Dale T. and Christopher A. Pissarides (1994) Job creation and job destruction in the theory of unemployment. Review of Economic Studies 61, 397-415.
Shimer, Robert (2005) The cyclical behavior of equilibrium unemployment and vacancies. American Economic Review 95, 25-49.
Thomas, Carlos (2008) Search and matching frictions and optimal monetary policy. Journal of Monetary Economics 55, 936-956.
Trigari, Antonella (2006) The role of search frictions and bargaining of inflation dynamics. IGIER Working Paper No. 304, Bocconi University.
Veracierto, Marcelo (2008) On the cyclical behavior of employment, unemployment and labor force participation. Journal of Monetary Economics 55, 1143-1157.
Yun, Tack (1996) Nominal price rigidity, money supply endogeneity, and business cycles. Journal of Monetary Economics 37, 345-370.