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Unemployment and Business Cycles

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  • Lawrence J. Christiano
  • Martin S. Eichenbaum
  • Mathias Trabandt

Abstract

We develop and estimate a general equilibrium model that accounts for key business cycle properties of macroeconomic aggregates, including labor market variables. In sharp contrast to leading New Keynesian models, wages are not subject to exogenous nominal rigidities. Instead we derive wage inertia from our specification of how firms and workers interact when negotiating wages. Our model outperforms the standard Diamond-Mortensen-Pissarides model both statistically and in terms of the plausibility of the estimated structural parameter values. Our model also outperforms an estimated sticky wage model.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19265.

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Date of creation: Aug 2013
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Handle: RePEc:nbr:nberwo:19265

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The equation at the core of modern macro
    by Noah Smith in Noahpinion on 2014-01-14 19:27:00
  2. Bücherkiste (9): Die Festung der Makroökonomen
    by Gerald Braunberger in Fazit on 2014-04-07 10:11:50
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Cited by:
  1. Zheng Liu & Jianjun Miao & Tao Zha, 2013. "Land prices and unemployment," Working Paper Series 2013-22, Federal Reserve Bank of San Francisco.
  2. Atsushi Inoue & Mototsugu Shintania, 2014. "Quasi-Bayesian Model Selection," Departmental Working Papers 1402, Southern Methodist University, Department of Economics.
  3. Jordi Galí & Frank Smets & Rafael Wouters, 2012. "Slow Recoveries: A Structural Interpretation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 9-30, December.
  4. Merkl, Christian & Balleer, Almut & Gehrke, Britta & Lechthaler, Wolfgang, 2013. "Does Short-Time Work Save Jobs? A Business Cycle Analysis," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79718, Verein für Socialpolitik / German Economic Association.
  5. Lawrence J. Christiano & Martin S. Eichenbaum & Mathias Trabandt, 2013. "Unemployment and Business Cycles," NBER Working Papers 19265, National Bureau of Economic Research, Inc.
  6. Hirakata, Naohisa & Sudo, Nao & Ueda, Kozo, 2013. "Is the net worth of financial intermediaries more important than that of non-financial firms?," Globalization and Monetary Policy Institute Working Paper 161, Federal Reserve Bank of Dallas.

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