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An Estimated New-Keynesian Model with Unemployment as Excess Supply of Labor

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  • Miguel Casares

    ()
    (Departamento de Economía, Universidad Pública de Navarra)

  • Antonio Moreno

    ()
    (Departamento de Economía, Universidad de Navarra)

  • Jesús Vázquez

    ()
    (Departamento FAE II, Universidad del País Vasco)

Abstract

Wage stickiness is incorporated to a New-Keynesian model with variable capital in a way that generates endogenous unemployment fluctuations as the log difference between aggregate labor supply and aggregate labor demand. After estimation with U.S. data, the implied second-moment statistics of the unemployment rate provide a reasonable match with those observed in the data. Our results also show that wage-push shocks, demand shifts and monetary policy shocks are the three major determinants of unemployment fluctuations. Compared to an estimated canonical DSGE model without unemployment: wage stickiness is higher, labor supply elasticity is lower, the slope of the New-Keynesian Phillips curve is flatter, and the importance of technology innovations on output growth variability increases.

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Bibliographic Info

Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 01/12.

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Length: 47 pages
Date of creation: 30 Jul 2012
Date of revision:
Handle: RePEc:una:unccee:wp0112

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Web page: http://www.unav.es/facultad/econom

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Keywords: sticky wages; unemployment; business cycles; New-Keynesian models.;

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References

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  1. Jordi Galí & Frank Smets & Rafael Wouters, 2011. "Unemployment in an estimated new Keynesian model," Economics Working Papers 1266, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2011.
  2. Smets, Frank & Wouters, Raf, 2007. "Shocks and frictions in US business cycles: a Bayesian DSGE approach," Working Paper Series 0722, European Central Bank.
  3. Miguel Casares & Antonio Moreno & Jesús Vázquez, 2009. "Wage Stickiness and Unemployment Fluctuations: An Alternative Approach," Faculty Working Papers 04/09, School of Economics and Business Administration, University of Navarra.
  4. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
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  7. Miguel Casares, 2007. "Firm-Specific or Household-Specific Sticky Wages in the New Keynesian Model?," International Journal of Central Banking, International Journal of Central Banking, vol. 3(4), pages 181-240, December.
  8. Galí, Jordi, 2010. "The Return of the Wage Phillips Curve," CEPR Discussion Papers 7700, C.E.P.R. Discussion Papers.
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Cited by:
  1. He Chen & Jun-ichi Inoue, 2013. "Dynamics of probabilistic labor markets: statistical physics perspective," Papers 1309.5158, arXiv.org.
  2. He Chen & Jun-ichi Inoue, 2013. "Statistical Mechanics of Labor Markets," Papers 1309.5156, arXiv.org.

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