IDEAS home Printed from https://ideas.repec.org/a/mcb/jmoncb/v42y2010i7p1235-1265.html
   My bibliography  Save this article

Monetary Shocks in a Model with Skill Loss

Author

Listed:
  • JULEN ESTEBAN-PRETEL
  • ELISA FARAGLIA

Abstract

Unemployment shows persistent and long-lasting responses to nominal and real shocks. Standard real business cycle models with search frictions but a homogeneous labor force are able to generate some volatility and persistence, but not enough to match the empirical evidence. Moreover, empirical studies emphasize the importance of the heterogeneity of the unemployment pool to fully understand unemployment dynamics. In particular, in most European countries the incidence of long-term unemployment is large and well known. One of the possible causes/consequences of long-term unemployment is the skill deterioration of the unemployment pool. In this paper, we introduce the skill loss mechanism, and therefore a heterogeneous labor force, in a New Keynesian framework with search frictions. Calibrating the model for the Spanish economy, we show that while the skill loss mechanism helps to explain the magnitude of the response of unemployment to monetary shocks, it does not improve the performance of the homogeneous worker model in terms of the persistence of the response, especially for short- and long-term unemployment. Copyright (c) 2010 The Ohio State University.

Suggested Citation

  • Julen Esteban-Pretel & Elisa Faraglia, 2010. "Monetary Shocks in a Model with Skill Loss," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1235-1265, October.
  • Handle: RePEc:mcb:jmoncb:v:42:y:2010:i:7:p:1235-1265
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1538-4616.2010.00340.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Laureys, Lien, 2014. "The cost of human capital depreciation during unemployment," Bank of England working papers 505, Bank of England.
    2. Kienzler, Daniel, 2012. "Long-term Unemployment over the Business Cycle, Skill Loss, and Monetary Policy," Working Papers on Finance 1205, University of St. Gallen, School of Finance.
    3. Vincent Sterk, 2015. "The Dark Corners of the Labor Market," 2015 Meeting Papers 798, Society for Economic Dynamics.
    4. Khalifa, Sherif, 2015. "Learning-by-doing and unemployment dynamics," Economic Modelling, Elsevier, vol. 44(C), pages 180-187.
    5. Vincent Sterk, 2016. "The Dark Corners of the Labor Market," Discussion Papers 1603, Centre for Macroeconomics (CFM).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:42:y:2010:i:7:p:1235-1265. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.