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Unemployment and Wage Rigidity in Japan: A DSGE Model Perspective

Author

Listed:
  • Chun-Hung Kuo

    (International Univeristy of Japan)

  • Hiroaki Miyamoto

    (The University of Tokyo)

Abstract

This paper develops a dynamic stochastic general equilibrium model with labor market frictions and nominal wage rigidity. We estimate our model for Japan's economy using Bayesian methods. This allows us to estimate the structural parameters of the Japanese economy, the unobservable shocks and examine their transmission mechanism. We can also study how wage rigidity affects overall model performance. Our analysis demonstrates the importance of including nominal wage rigidity in explaining the Japanese data. We find that while nominal wage rigidity plays only a trivial role in inflation dynamics, it is crucial in determining the response of labor market variables to structural shocks.

Suggested Citation

  • Chun-Hung Kuo & Hiroaki Miyamoto, 2016. "Unemployment and Wage Rigidity in Japan: A DSGE Model Perspective," Working Papers EMS_2016_06, Research Institute, International University of Japan.
    • Handle: RePEc:iuj:wpaper:ems_2016_06
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    File URL: https://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2016_06.pdf
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    References listed on IDEAS

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    Cited by:

    1. Yoshino, Naoyuki & Miyamoto, Hiroaki, 2017. "Declined effectiveness of fiscal and monetary policies faced with aging population in Japan," Japan and the World Economy, Elsevier, vol. 42(C), pages 32-44.
    2. Hiroaki Miyamoto, 2016. "Uncertainty shocks and labor market dynamics in Japan," Working Papers SDES-2016-8, Kochi University of Technology, School of Economics and Management, revised Jun 2016.
    3. Yoshino, Naoyuki & Miyamoto, Hiroaki, 2017. "Decreased Effectiveness of Fiscal and Monetary Policies in Japan’s Aging Society," ADBI Working Papers 691, Asian Development Bank Institute.

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    More about this item

    Keywords

    DSGE models; Bayesian estimation; Labor market search; Wage rigidity;
    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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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