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Estimated Small Open Economy Model With Frictional Unemployment

  • JULIEN ALBERTINI
  • GÜNEŞ KAMBER
  • MICHAEL KIRKER

This paper investigates labour market dynamics in New Zealand by estimating a structural small open economy model enriched with standard search and matching frictions in the labour market. We show that the model its the business cycle features of key macroeconomic variables reasonably well and provides an appealing monetary transmission mechanism. We then extend our analysis to understand the driving forces behind labour market variables. Our findings suggest that the bulk of variation in labour market variables is solely explained by disturbances pertaining to the labour market.

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File URL: http://hdl.handle.net/10.1111/j.1468-0106.2012.00585.x
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Article provided by Wiley Blackwell in its journal Pacific Economic Review.

Volume (Year): 17 (2012)
Issue (Month): 2 (05)
Pages: 326-353

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Handle: RePEc:bla:pacecr:v:17:y:2012:i:2:p:326-353
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  1. repec:cup:cbooks:9780521192828 is not listed on IDEAS
  2. Lewis Evans & Arthur Grimes & Bryce Wilkinson, 1996. "Economic Reform in New Zealand 1984-95: The Pursuit of Efficiency," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1856-1902, December.
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  17. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  18. Marcus Hagedorn & Iourii Manovskii, 2007. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," IEW - Working Papers 351, Institute for Empirical Research in Economics - University of Zurich.
  19. Eran Yashiv, 2005. "Evaluating the Performance of the Search and Matching Model," CEP Discussion Papers dp0677, Centre for Economic Performance, LSE.
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  22. Michael Kirker, 2008. "Does natural rate variation matter? Evidence from New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2008/17, Reserve Bank of New Zealand.
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