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Inflation and labor market dynamics revisited

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  • Sveen, Tommy
  • Weinke, Lutz

Abstract

We demonstrate that the presence of an empirically plausible labor adjustment decision at the firm level rationalizes strategic complementarities in price-setting which help explain inflation dynamics. Those strategic complementarities are typically assumed away in the related existing literature. This motivates our revisiting of inflation and labor market dynamics.

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  • Sveen, Tommy & Weinke, Lutz, 2009. "Inflation and labor market dynamics revisited," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1096-1100, November.
    • Handle: RePEc:eee:moneco:v:56:y:2009:i:8:p:1096-1100
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    References listed on IDEAS

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    Cited by:

    1. Carlos Thomas, 2011. "Search Frictions, Real Rigidities, and Inflation Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(6), pages 1131-1164, September.
    2. Lawrence Christiano & Mathias Trabandt & Karl Walentin, 2021. "Involuntary Unemployment and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 39, pages 26-54, January.
    3. Francesco Furlanetto & Nicolas Groshenny, 2012. "Matching efficiency and business cycle fluctuations," Working Paper 2012/07, Norges Bank.
    4. Francesco Furlanetto & Nicolas Groshenny, 2016. "Mismatch Shocks and Unemployment During the Great Recession," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(7), pages 1197-1214, November.
    5. Kurozumi, Takushi & Van Zandweghe, Willem, 2010. "Labor market search, the Taylor principle, and indeterminacy," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 851-858, October.
    6. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2010. "DSGE Models for Monetary Policy Analysis," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 7, pages 285-367, Elsevier.
    7. Sergio A. Lago Alves, 2018. "Monetary Policy, Trend Inflation, and Unemployment Volatility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(4), pages 637-673, June.
    8. Casares, Miguel, 2013. "On firm-level, industry-level, and aggregate employment fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2963-2978.
    9. Nicolas Groshenny, 2009. "Evaluating a monetary business cycle model with unemployment for the euro area," Working Paper Research 173, National Bank of Belgium.
    10. Pierrick Clerc, 2021. "The Dynamics of Unemployment and Inflation in New Keynesian Models with Two Labor Margins," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(2-3), pages 301-332, March.
    11. Furlanetto Francesco & Sveen Tommy & Weinke Lutz, 2020. "Technology and the two margins of labor adjustment: a New Keynesian perspective," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(1), pages 1-18, January.
    12. P. Clerc, 2015. "Credible Wage Bargaining and the Joint Dynamics of Unemployment and Inflation," Working papers 568, Banque de France.
    13. Kurozumi, Takushi & Van Zandweghe, Willem, 2012. "Learning about monetary policy rules when labor market search and matching frictions matter," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 523-535.

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    Labor market Inflation dynamics;

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