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Labor adjustment costs and complex eigenvalues

Author

Listed:
  • Xavier Fairise

    (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université)

  • Patrick Fève

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Aggregate variables display both persistence and damped oscillations in response to temporary external shocks. The standard real business cycles (RBC) model cannot explain these patterns, because its stable eigenvalues are positive and real. We demonstrate that this model with labor adjustment costs can yield complex eigenvalues. However, numerical experiments suggest that the model cannot display distinguishable damped oscillations of aggregate variables.

Suggested Citation

  • Xavier Fairise & Patrick Fève, 2005. "Labor adjustment costs and complex eigenvalues," Post-Print hal-04318788, HAL.
    • Handle: RePEc:hal:journl:hal-04318788
    DOI: 10.1007/s00199-005-0007-0
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    Cited by:

    1. Matsue, Toyoki, 2025. "Strategy for securing employment that considers job filling, separation, and productivity shocks," MPRA Paper 123533, University Library of Munich, Germany.
    2. Matsue, Toyoki, 2019. "Employment fluctuations in a dynamic model with long-term and short-term contracts," MPRA Paper 97545, University Library of Munich, Germany.
    3. Chang, Juin-jen & Huang, Chun-chieh & Lai, Ching-chong, 2007. "Working hours reduction and wage contracting style in a dynamic model with labor adjustment costs," Journal of Economic Dynamics and Control, Elsevier, vol. 31(3), pages 971-993, March.

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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