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Search with wage posting under sticky prices

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  • Andrew T. Foerster
  • Jose Mustre-del-Rio

Abstract

This paper examines the implications of interacting pricing frictions, labor market frictions, and consumption risk by comparing variants of a New Keynesian model. The model variants make alternative assumptions about whether hiring and pricing decisions occur within the same firm or across different firms, and whether workers pool income. Each model implies the same contract is offered to workers, making model comparisons transparent. The economy's response to changes in unemployment benefits or persistently below‐target inflation depends on whether hiring and pricing decisions are integrated. The dynamics following technology or monetary shocks are shaped both by firm‐ and worker‐level assumptions.
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Suggested Citation

  • Andrew T. Foerster & Jose Mustre-del-Rio, 2014. "Search with wage posting under sticky prices," Research Working Paper RWP 14-17, Federal Reserve Bank of Kansas City.
    • Handle: RePEc:fip:fedkrw:rwp14-17
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    File URL: https://www.kansascityfed.org/documents/583/pdf-Search%20with%20Wage%20Posting%20under%20Sticky%20Prices.pdf
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    References listed on IDEAS

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    Cited by:

    1. Sergio A. Lago Alves, 2018. "Monetary Policy, Trend Inflation, and Unemployment Volatility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(4), pages 637-673, June.

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    More about this item

    Keywords

    Search; Matching; Inflation; Sticky Prices;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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