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Search, Nash Bargaining and Rule of Thumb Consumers

Author

Listed:
  • José Emilio Boscá

    (University of Valencia, Spain)

  • Javier Ferri

    (University of Valencia, Spain)

  • Rafa Doménech

    (BBVA Economic Research Department, Spain)

Abstract

This paper analyses the effects of introducing typical Keynesian features, namely rule-of-thumb consumers and consumption habits, into a standard labour market search model. It is a well-known fact that labour market matching with Nash-wage bargaining improves the ability of the standard real business cycle model to replicate some of the cyclical properties featuring the labour market. However, when habits and rule-of-thumb consumers are taken into account, the labour market search model gains extra power to reproduce some of the stylised facts characterising the US labour market, as well as other business cycle facts concerning aggregate consumption and investment behaviour.

Suggested Citation

  • José Emilio Boscá & Javier Ferri & Rafa Doménech, 2009. "Search, Nash Bargaining and Rule of Thumb Consumers," Working Papers 0806, International Economics Institute, University of Valencia.
    • Handle: RePEc:iei:wpaper:0806
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    File URL: http://iei.uv.es/docs/wp_internos/RePEc/pdf/iei_0806.pdf
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    More about this item

    Keywords

    general equilibrium; labour market search; habits; rule-of-tumb consumers;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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