Propagation Mechanism in the New-Keynesian Model with Labor Adjustment Costs
Calvo nominal rigidities are well known to enhance the monetary transmission mechanism in dynamic stochastic general equilibrium (DSGE) models. However, this class of models gives rise to certain anomalies, including excessively high volatilities and countercyclical productivity. In addition, much of the New-Keynesian literature has miss-calibrated the propagation-determining parameter of the Calvo formulation. This paper finds that using proper parameterization does not eliminate the anomalies instead it lowers persistence. In light of this, labor adjustment costs are added to the DSGE model with nominal wage rigidities and shown to overcome the shortcomings by yielding reasonable volatilities and a positive correlation between output and productivity, and at the same time increasing persistence.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:|
|Date of revision:||29 Sep 2008|
|Contact details of provider:|| Postal: 2500 University Drive N.W., Calgary, Alberta, T2N 1N4|
Phone: (403) 220-5857
Fax: (403) 282-5262
Web page: http://econ.ucalgary.ca/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:clg:wpaper:2008-31. 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: (May Ives)
If references are entirely missing, you can add them using this form.