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Labor Market Frictions into Staggered Wage Contracts

  • Francesco Zanetti

    ()

    (Bank of England and EABCN)

This paper proposes a generalization of the Calvo wage-setting equation, which embeds labor market frictions in the form of a Nash wage bargain. Adding labor market frictions changes significantly the dynamics of the standard wage-setting equation, such that it may have non-trivial implications for the design of optimal monetary policy, and could improve the ability of a general equilibrium model to replicate important labor market stylized facts.

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File URL: http://www.accessecon.com/pubs/EB/2006/Volume5/EB-06E30028A.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 5 (2006)
Issue (Month): 13 ()
Pages: 1-7

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Handle: RePEc:ebl:ecbull:eb-06e30028
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  1. Robert E. Hall, 2006. "The labor market and macro volatility: a nonstationary general-equilibrium analysis," Proceedings, Federal Reserve Bank of San Francisco.
  2. Rabanal, Pau & Rubio-Ramirez, Juan F., 2005. "Comparing New Keynesian models of the business cycle: A Bayesian approach," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1151-1166, September.
  3. Erceg, Christopher J. & Henderson, Dale W. & Levin, Andrew T., 2000. "Optimal monetary policy with staggered wage and price contracts," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 281-313, October.
  4. Zanetti, Francesco, 2006. "Labor Market Frictions, Indeterminacy, and Interest Rate Rules," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(7), pages 1959-1970, October.
  5. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  6. Olivier Blanchard & Jordi Gali, 2006. "A new Keynesian model with unemployment," Working Paper Research 92, National Bank of Belgium.
  7. Huang, Kevin X. D. & Liu, Zheng, 2002. "Staggered price-setting, staggered wage-setting, and business cycle persistence," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 405-433, March.
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