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Unemployment, Capital and Hours: On the quantitative performance of a DSGE

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  • Philip Jung

    ()
    (Goethe University Frankfurt)

Abstract

This paper shows that the standard Mortensen-Pissarides framework embedded in a RBC macroeconomic model with risk averse agents, capital and a labor-leisure choice has the ability to match all moments of the ac- tual US-unemployment rate and other labor market variables within tight bounds when estimated on aggregate output alone. It correctly predicts around 90% of the variation on business-cycle frequency. We describe the set of parameter values that generate these results and show that they lie in the space of commonly estimated or calibrated values in macroeconomic DSGE models. In addition we show that some wage setting arrangements like "right to manage" approaches typically employed in the literature will be unable to generate the observed fuctuations in unemployment rates and give the reason for their failure

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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 123.

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Date of creation: 04 Jul 2006
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Handle: RePEc:sce:scecfa:123

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Keywords: Unemployment;

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Cited by:
  1. Makoto Nakajima, 2012. "Business Cycles In The Equilibrium Model Of Labor Market Search And Self‐Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 399-432, 05.
  2. Holt Richard, 2008. "Job Reallocation, Unemployment and Hours in a New Keynesian Model," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-47, August.
  3. Kuester, Keith, 2007. "Real price and wage rigidities in a model with matching frictions," Working Paper Series 0720, European Central Bank.
  4. Jung, Philip, 2007. "Optimal Taxation and (Female)-Labor Force Participation over the Cycle," MPRA Paper 8744, University Library of Munich, Germany, revised 13 May 2008.

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