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Nominal Wage Rigidities in a New Keynesian Model with Frictional Unemployment

  • Bodart, Vincent

    ()

    (Université catholique de Louvain)

  • De Walque, Gregory

    ()

    (National Bank of Belgium)

  • Pierrard, Olivier

    ()

    (Central Bank of Luxembourg)

  • Sneessens, Henri R.

    ()

    (University of Luxembourg)

  • Wouters, Raf

    ()

    (National Bank of Belgium)

In this paper, we propose a search and matching model with nominal stickiness à la Calvo in the wage bargaining. We analyze the properties of the model, first, in the context of a typical real business cycle model driven by stochastic productivity shocks and second, in a fully specified monetary DSGE model with various real and nominal rigidities and multiple shocks. The model generates realistic statistics for the important labor market variables.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2528.

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Length: 40 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2528
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  1. Antonella Trigari, 2009. "Equilibrium Unemployment, Job Flows, and Inflation Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 1-33, 02.
  2. Dale T. Mortensen & Christopher A. Pissarides, 1999. "Job Reallocation, Employment Fluctuations and Unemployment," CEP Discussion Papers dp0421, Centre for Economic Performance, LSE.
  3. Moyen, S. & Sahuc, J-G., 2004. "Incorporating Labour Market Frictions into an Optimising-Based Monetary Policy Model," Working papers 105, Banque de France.
  4. Christoffel, Kai & Linzert, Tobias, 2006. "The role of real wage rigidity and labor market frictions for unemployment and inflation dynamics," Discussion Paper Series 1: Economic Studies 2006,11, Deutsche Bundesbank, Research Centre.
  5. Krause, M.U. & Lubik, T.A., 2004. "On-the-job Search and the Cyclical Dynamics of the Labor Market," Discussion Paper 2004-92, Tilburg University, Center for Economic Research.
  6. Gertler, Mark & Trigari, Antonella, 2006. "Unemployment fluctuation with staggered Nash wage bargaining," CFS Working Paper Series 2007/09, Center for Financial Studies (CFS).
  7. Marvin Goodfriend & Robert G. King, 2001. "The Case for Price Stability," NBER Working Papers 8423, National Bureau of Economic Research, Inc.
  8. Carl E. Walsh, 2005. "Labor Market Search, Sticky Prices, and Interest Rate Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 829-849, October.
  9. Keith Kuester & Goethe University, 2006. "Real Price and Wage Rigidities in a Model with Matching Frictions," Computing in Economics and Finance 2006 152, Society for Computational Economics.
  10. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research 35, National Bank of Belgium.
  11. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  12. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper 0107, Federal Reserve Bank of Cleveland.
  13. Shigeru Fujita & Garey Ramey, 2005. "The dynamic Beveridge curve," Working Papers 05-22, Federal Reserve Bank of Philadelphia.
  14. Olivier Blanchard & Jordi Galí, 2005. "Real Wage Rigidities and the New Keynesian Model," Working Papers 243, Barcelona Graduate School of Economics.
  15. Vincent Bodart & Olivier Pierrard & Henri R. Sneessens, 2005. "Calvo Wages in a Search Unemployment Model," DNB Working Papers 068, Netherlands Central Bank, Research Department.
  16. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  17. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
  18. Christoffel, Kai & Kuester, Keith & Linzert, Tobias, 2005. "The Impact of Labor Markets on the Transmission of Monetary Policy in an Estimated DSGE Model," IZA Discussion Papers 1902, Institute for the Study of Labor (IZA).
  19. Robert E. Hall, 2005. "Job Loss, Job Finding, and Unemployment in the U.S. Economy Over the Past Fifty Years," NBER Working Papers 11678, National Bureau of Economic Research, Inc.
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