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A Note on Instability and Indeterminacy in Search and Matching Models

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Listed author(s):
  • Thomas Lubik
  • Michael Krause

Abstract

We demonstrate the possibility of indeterminacy and non-existence of equilibrium dynamics in a standard business cycle model with search and matching frictions in the labor market. Our results arise for empirically plausible parametrizations and do not rely upon a mechanism such as increasing returns.

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File URL: http://econ.jhu.edu/wp-content/uploads/pdf/papers/wp518lubik.pdf
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Paper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number 518.

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Date of creation: Nov 2004
Handle: RePEc:jhu:papers:518
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  1. repec:wop:calsdi:97-23 is not listed on IDEAS
  2. Krause, Michael U. & Lubik, Thomas A., 2007. "The (ir)relevance of real wage rigidity in the New Keynesian model with search frictions," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 706-727, April.
  3. Cheron, Arnaud & Langot, Francois, 2000. "The Phillips and Beveridge curves revisited," Economics Letters, Elsevier, vol. 69(3), pages 371-376, December.
  4. Thomas Lubik & Michael Krause, 2004. "On-the-Job Search and the Cyclical Dynamics of the Labor Market," Economics Working Paper Archive 513, The Johns Hopkins University,Department of Economics.
  5. Giammarioli, Nicola, 2003. "Indeterminacy and search theory," Working Paper Series 271, European Central Bank.
  6. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
  7. Trigari, Antonella, 2004. "Equilibrium unemployment, job flows and inflation dynamics," Working Paper Series 304, European Central Bank.
  8. Cooley, Thomas F. & Quadrini, Vincenzo, 1999. "A neoclassical model of the Phillips curve relation," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 165-193, October.
  9. 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.
  10. Michael C. Burda & Mark Weder, 2002. "Complementarity of Labor Market Institutions, Equilibrium Unemployment and the Propagation of Business Cycles," German Economic Review, Verein für Socialpolitik, vol. 3(1), pages 1-24, 02.
  11. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-132, March.
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Cited by:

  1. Faia, Ester, 2008. "Optimal monetary policy rules with labor market frictions," Journal of Economic Dynamics and Control, Elsevier, vol. 32(5), pages 1600-1621, May.
  2. Takushi Kurozumi & Willem Van Zandweghe, 2008. "Labor market search and interest rate policy," Research Working Paper RWP 08-03, Federal Reserve Bank of Kansas City.
  3. Reinout De Bock, 2007. "Investment-Specific Technology Shocks and Labor Market Frictions," Working Paper Research 108, National Bank of Belgium.
  4. Faia, Ester, 2009. "Ramsey monetary policy with labor market frictions," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 570-581, May.
  5. Ernst, Ekkehard & Semmler, Willi, 2010. "Global dynamics in a model with search and matching in labor and capital markets," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1651-1679, September.

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