Labor Market Frictions and the International Propagation Mechanism
The paper investigates the determinants of international business cycle comovement in a two-country Dynamic Stochastic General Equilibrium (DSGE) model featured by monopolistic competition and nominal price rigidity, following so the New Open Economy Macroeconomy (NOEM) literature. Within this framework, we assess the role of labor market search and matching frictions in the international propagation of supply and monetary shocks. Our results show that labor market frictions improve the ability of the New Open Economy Macroeconomy framework to account for international business cycles comovement. In particular, the NOEM model with labor market search is consistent with the international propagation mechanism of monetary shocks identified in the data. Through their impact on labor market dynamics, labor market institutions affect the magnitude of international comovement. Business cycle synchronization is thus found to increase with the generosity of the unemployment benefits system, whereas it decreases with the strictness of employment protection.
|Date of creation:||2009|
|Contact details of provider:|| Postal: 33, boulevard du port - 95011 Cergy-Pontoise Cedex|
Phone: 33 1 34 25 60 63
Fax: 33 1 34 25 62 33
Web page: http://thema.u-cergy.fr
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ema:worpap:2009-05. 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: (Stefania Marcassa)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.