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Search Unemployment in a Dynamic New Keynesian Model of the Business Cycle

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Author Info
Rafel Gerke () (Ehemalig Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology))
Jens Rubart () (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology))

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Abstract

The monetary transmission mechanism plays an important role in studying the effects of monetary policy on the real side of the economy. At least since Chari et al. (2000) it is generally accepted that new keynesian models of the business cycle display a "persistence" problem. In this paper, we follow the approach of Walsh (2002) and include search unemployment in a dynamic new keynesian model of the business cycle in order to study the effects of a monetary shock. After deriving the equilibrium solution of the model, we study the behavior of the impulse response functions due to a monetary shock. To complete our analysis we confront the results of our simulation to time series data for the U.S., U.K. and Germany. Our main result is that the introduction of search unemployment does improve the capability of the model to reproduce some stylized facts of the monetary transmission mechanism, however to a less extent than expected.

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Publisher Info
Paper provided by Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology) in its series Darmstadt Discussion Papers in Economics with number 119.

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Length: 30 pages
Date of creation: Nov 2003
Date of revision:
Handle: RePEc:tud:ddpiec:119

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Related research
Keywords: Search Unemployment; Monetary Shocks; Business Cycles;

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: 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
J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs

References listed on IDEAS
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