Sticky Prices, Sticky Wages, and also Unemployment
AbstractThis paper shows a New Keynesian model where wages are set at the value that matches household´s labor supply with firm´s labor demand. Subsequently, wage stickiness brings industry-level unemployment fluctuations. After aggregation, the rate of wage in?ation is negatively related to unemployment, as in the original Phillips (1958) curve, with an additional term that provides forward-looking dynamics. The supply-side of the model can be captured with dynamic expressions equivalent to those obtained in Erceg, Henderson, and Levin (2000), though with different slope coefficients. Impulse-response functions from a technology shock illustrate the inter-actions between sticky prices, sticky wages and unemployment.
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Bibliographic InfoPaper provided by Departamento de Economía - Universidad Pública de Navarra in its series Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra with number 0801.
Date of creation: 2008
Date of revision:
Publication status: Published in
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Find related papers by JEL classification:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-16 (All new papers)
- NEP-CBA-2008-02-16 (Central Banking)
- NEP-LAB-2008-02-16 (Labour Economics)
- NEP-MAC-2008-02-16 (Macroeconomics)
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- Miguel Casares & Antonio Moreno & Jesús Vázquez, 2009.
"Wage Stickiness and Unemployment Fluctuations: An Alternative Approach,"
Documentos de Trabajo - Lan Gaiak Departamento de EconomÃa - Universidad PÃºblica de Navarra
0902, Departamento de Economía - Universidad Pública de Navarra.
- Miguel Casares & Antonio Moreno & Jesús Vázquez, 2012. "Wage stickiness and unemployment fluctuations: an alternative approach," SERIEs, Spanish Economic Association, vol. 3(3), pages 395-422, September.
- Miguel Casares & Antonio Moreno & Jesús Vázquez, 2009. "Wage Stickiness and Unemployment Fluctuations: An Alternative Approach," Faculty Working Papers 04/09, School of Economics and Business Administration, University of Navarra.
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