Advanced Search
MyIDEAS: Login to save this paper or follow this series

Unemployment and Business Cycles

Contents:

Author Info

  • 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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w19265.pdf
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

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

as in new window
Length:
Date of creation: Aug 2013
Date of revision:
Handle: RePEc:nbr:nberwo:19265

Note: EFG ME
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Erceg, Christopher J. & Henderson, Dale W. & Levin, Andrew T., 2000. "Optimal monetary policy with staggered wage and price contracts," Journal of Monetary Economics, Elsevier, Elsevier, vol. 46(2), pages 281-313, October.
  2. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper Series, Federal Reserve Bank of Chicago WP-01-08, Federal Reserve Bank of Chicago.
  3. Hagedorn, Marcus & Manovskii, Iourii, 2008. "The cyclical behavior of equilibrium unemployment and vacancies revisited," Working Paper Series, European Central Bank 0853, European Central Bank.
  4. Lawrence J. Christiano & Mathias Trabandt & Karl Walentin, 2010. "Involuntary unemployment and the business cycle," CQER Working Paper, Federal Reserve Bank of Atlanta 2010-03, Federal Reserve Bank of Atlanta.
  5. Federico Ravenna & Carl E. Walsh, 2007. "Vacancies, Unemployment, and the Phillips Curve," Kiel Working Papers 1362, Kiel Institute for the World Economy.
  6. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2011. "Introducing financial frictions and unemployment into a small open economy model," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 35(12), pages 1999-2041.
  7. Shigeru Fujita & Garey Ramey, 2009. "The Cyclicality Of Separation And Job Finding Rates," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 415-430, 05.
  8. Luca Sala & Antonella Trigari & Mark Gertler, 2007. "An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining," 2007 Meeting Papers, Society for Economic Dynamics 353, Society for Economic Dynamics.
  9. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers, C.V. Starr Center for Applied Economics, New York University 99-13, C.V. Starr Center for Applied Economics, New York University.
  10. Luigi Paciello, 2009. "Does Inflation Adjust Faster to Aggregate Technology Shocks than to Monetary Policy Shocks?," EIEF Working Papers Series 0917, Einaudi Institute for Economics and Finance (EIEF), revised Apr 2011.
  11. Matthias S. Hertweck, 2011. "Strategic Wage Bargaining, Labor Market Volatility, and Persistence," Working Paper Series of the Department of Economics, University of Konstanz, Department of Economics, University of Konstanz 2011-26, Department of Economics, University of Konstanz.
  12. Raj Chetty & Adam Guren & Dayanand S. Manoli & Andrea Weber, 2011. "Does Indivisible Labor Explain the Difference Between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities," NBER Working Papers 16729, National Bureau of Economic Research, Inc.
  13. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Jordi Gali & Frank Smets & Raf Wouters, 2010. "Unemployment in an Estimated New Keynesian Model," 2010 Meeting Papers, Society for Economic Dynamics 126, Society for Economic Dynamics.
  15. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, MIT Press, vol. 1(5), pages 1123-1175, 09.
  16. Lawrence J. Christiano & Martin S. Eichenbaum & Mathias Trabandt, 2013. "Unemployment and business cycles," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 1089, Board of Governors of the Federal Reserve System (U.S.).
  17. Francesco Furlanett & Nicolas Groshenny, 2012. "Matching efficiency and business cycle fluctuations," Reserve Bank of New Zealand Discussion Paper Series DP2012/06, Reserve Bank of New Zealand.
  18. Guido Ascari & Nicola Branzoli & Efrem Castelnuovo, 2011. "Trend Inflation, Wage Indexation, and Determinacy in the U.S," Quaderni di Dipartimento, University of Pavia, Department of Economics and Quantitative Methods 153, University of Pavia, Department of Economics and Quantitative Methods.
  19. Jonas D. M. Fisher, 2006. "The Dynamic Effects of Neutral and Investment-Specific Technology Shocks," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 114(3), pages 413-451, June.
  20. Yashiv, E., 1999. "The Determinants of Equilibrium Unemployment," Papers, Tel Aviv 36-99, Tel Aviv.
  21. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2010. "DSGE Models for Monetary Policy Analysis," Handbook of Monetary Economics, Elsevier, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 7, pages 285-367 Elsevier.
  22. Mikael Carlsson & Stefan Eriksson & Nils Gottfries, 2013. "Product market imperfections and employment dynamics," Oxford Economic Papers, Oxford University Press, vol. 65(2), pages 447-470, April.
  23. Francesco Furlanetto & Nicolas Groshenny, 2013. "Mismatch shocks and unemployment during the Great Recession," Working Paper, Norges Bank 2013/16, Norges Bank.
  24. Silva, José Ignacio & Toledo, Manuel, 2009. "Labor Turnover Costs And The Cyclical Behavior Of Vacancies And Unemployment," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 13(S1), pages 76-96, May.
  25. Galí, Jordi, 2010. "The Return of the Wage Phillips Curve," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7700, C.E.P.R. Discussion Papers.
  26. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  27. Peter J. Klenow & Benjamin A. Malin, 2010. "Microeconomic Evidence on Price-Setting," NBER Working Papers 15826, National Bureau of Economic Research, Inc.
  28. Mark Aguiar & Erik Hurst & Loukas Karabarbounis, 2013. "Time Use during the Great Recession," American Economic Review, American Economic Association, American Economic Association, vol. 103(5), pages 1664-96, August.
  29. Rogerson, Richard & Wallenius, Johanna, 2009. "Micro and macro elasticities in a life cycle model with taxes," Journal of Economic Theory, Elsevier, Elsevier, vol. 144(6), pages 2277-2292, November.
  30. Anton A. Cheremukhin & Paulina Restrepo-Echavarria, 2010. "The labor wedge as a matching friction," Working Papers, Federal Reserve Bank of Dallas 1004, Federal Reserve Bank of Dallas.
  31. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, Econometric Society, vol. 50(6), pages 1345-70, November.
  32. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
  33. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, American Economic Association, vol. 72(5), pages 968-79, December.
  34. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  35. Christopher A. Sims & Tao Zha, 2004. "Were there regime switches in U.S. monetary policy?," Working Paper, Federal Reserve Bank of Atlanta 2004-14, Federal Reserve Bank of Atlanta.
  36. Thomas Lubik & Michael Krause, 2003. "The (Ir)relevance of Real Wage Rigidity in the New Keynesian Model with Search Frictions," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 504, The Johns Hopkins University,Department of Economics.
  37. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, Elsevier, vol. 37(2-3), pages 345-370, April.
  38. Martin Eichenbaum & Nir Jaimovich & Sergio Rebelo, 2011. "Reference Prices, Costs, and Nominal Rigidities," American Economic Review, American Economic Association, American Economic Association, vol. 101(1), pages 234-62, February.
  39. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 36(2), pages 269-300, November.
  40. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 676-90, September.
Full references (including those not matched with items on IDEAS)

Citations

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
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Atsushi Inoue & Mototsugu Shintania, 2014. "Quasi-Bayesian Model Selection," Departmental Working Papers, Southern Methodist University, Department of Economics 1402, Southern Methodist University, Department of Economics.
  2. Balleer, Almut & Gehrke, Britta & Lechthaler, Wolfgang & Merkl, Christian, 2013. "Does Short-Time Work Save Jobs? A Business Cycle Analysis," IZA Discussion Papers 7475, Institute for the Study of Labor (IZA).
  3. 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, Federal Reserve Bank of Dallas 161, Federal Reserve Bank of Dallas.
  4. Galí, Jordi & Smets, Frank & Wouters, Rafael, 2012. "Slow Recoveries: A Structural Interpretation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8978, C.E.P.R. Discussion Papers.
  5. Zheng Liu & Jianjun Miao & Tao Zha, 2013. "Land prices and unemployment," Working Paper Series, Federal Reserve Bank of San Francisco 2013-22, Federal Reserve Bank of San Francisco.
  6. Lawrence J. Christiano & Martin S. Eichenbaum & Mathias Trabandt, 2013. "Unemployment and Business Cycles," NBER Working Papers 19265, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:19265. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.