Stochastic Dynamics and Matching in the Old Keynesian Economics: A Rationale for the Shimer's Puzzle
AbstractFollowing the Farmer’s (2008a-b, 2010) micro-foundation of the General Theory, I build a competitive search model in which output and employment are demand-driven, prices are flexible, the nominal wage is used as numeraire and agents are divided in two categories: wage and profit earners. Within this framework, I show that the model economy has a continuum of demand constrained equilibria that might be consistent with a certain degree of endogenous real wage stickiness. Moreover, calibrating and simulating the model economy in order to fit the US first-moments data, I show that this setting can provide a rationale for the Shimer’s (2005) puzzle, i.e., the relative stability of real wages in spite of the large volatility of labor market tightness.
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Bibliographic InfoPaper provided by Dipartimento di Scienze Economiche (DSE), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2010/95.
Date of creation: 18 Jan 2010
Date of revision:
Stochastic Dynamics; Competitive Search; Old Keynesian Economics; Demand Constrained Equilibrium; Numerical Simulations.;
Find related papers by JEL classification:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-30 (All new papers)
- NEP-HPE-2010-01-30 (History & Philosophy of Economics)
- NEP-LAB-2010-01-30 (Labour Economics)
- NEP-MAC-2010-01-30 (Macroeconomics)
- NEP-PKE-2010-01-30 (Post Keynesian Economics)
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- Roger E. A. Farmer, 2012.
"Confidence, Crashes and Animal Spirits,"
Royal Economic Society, vol. 122(559), pages 155-172, 03.
- Marco Guerrazzi, 2011.
"Expectations, Employment and Prices: A Suggested Interpretation of the New ‘Farmerian’ Economics,"
2011/116, Dipartimento di Scienze Economiche (DSE), University of Pisa, Pisa, Italy.
- Guerrazzi, Marco, 2010. "Expectations, employment and prices: a suggested interpretation of the new 'farmerian' economics," MPRA Paper 30832, University Library of Munich, Germany.
- Lorenzo Corsini & Pier Mario Pacini & Luca Spataro, 2010. "Workers' Choice on Pension Schemes: an Assessment of the Italian TFR Reform Through Theory and Simulations," Discussion Papers 2010/96, Dipartimento di Scienze Economiche (DSE), University of Pisa, Pisa, Italy.
- Marco Guerrazzi, 2010. "How to Reduce Unemployment: Notes on Macro-Economic Stability and Dynamics," Discussion Papers 2010/106, Dipartimento di Scienze Economiche (DSE), University of Pisa, Pisa, Italy.
- Marco Guerrazzi, 2011. "Search And Stochastic Dynamics In The Old Keynesian Economics: A Rationale For The Shimer Puzzle," Metroeconomica, Wiley Blackwell, vol. 62(4), pages 561-586, November.
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