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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. Olivier Blanchard & Jordi Galí, 2005. "Real Wage Rigidities and the New Keynesian Model," Working Papers 243, Barcelona Graduate School of Economics.
  2. Michael U. Krause & Thomas A. Lubik, 2006. "On-the-Job Search and the Cyclical Dynamics of the Labor Market," Computing in Economics and Finance 2006 455, Society for Computational Economics.
  3. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, 09.
  4. 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).
  5. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  6. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  7. Moyen, Stephane & Sahuc, Jean-Guillaume, 2005. "Incorporating labour market frictions into an optimising-based monetary policy model," Economic Modelling, Elsevier, vol. 22(1), pages 159-186, January.
  8. Walsh, Carl E., 2003. "Labor Market Search, Sticky Prices, and Interest Rate Policies," Santa Cruz Center for International Economics, Working Paper Series qt6tg550dv, Center for International Economics, UC Santa Cruz.
  9. Fujita, Shigeru & Ramey, Garey, 2005. "The Dynamic Beveridge Curve," University of California at San Diego, Economics Working Paper Series qt4m04n09h, Department of Economics, UC San Diego.
  10. Mark Gertler & Antonella Trigari, 2006. "Unemployment fluctuations with staggered Nash wage bargaining," Proceedings, Federal Reserve Bank of San Francisco.
  11. 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.
  12. Bodart, Vincent & Pierrard, Olivier & Sneessens, Henri R., 2006. "Calvo Wages in a Search Unemployment Model," IZA Discussion Papers 2521, Institute for the Study of Labor (IZA).
  13. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "Job reallocation, employment fluctuations and unemployment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 18, pages 1171-1228 Elsevier.
  14. Keith Kuester, 2006. "Real Price and Wage Rigidities in a Model with Matching Frictions," 2006 Meeting Papers 546, Society for Economic Dynamics.
  15. 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.
  16. Trigari, Antonella, 2004. "Equilibrium unemployment, job flows and inflation dynamics," Working Paper Series 0304, European Central Bank.
  17. Marvin Goodfriend & Robert G. King, 2001. "The Case for Price Stability," NBER Working Papers 8423, National Bureau of Economic Research, Inc.
  18. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  19. 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.
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