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Capital, Endogenous Separations, and the Business Cycle

  • Björn van Roye
  • Dennis Wesselbaum

We implement capital in an endogenous separations New Keynesian matching model. In contrast to the vintage capital theory, we suggest a more general approach, such that workers have unrestricted access to a proportional share of the capital stock. We find that the introduction of capital generates an important channel for the transmission of aggregate productivity shocks, using capital-labor trade-off. The model generates higher volatilities of key variables and therefore enhances the performance of the matching model to generate stylized facts in response to an aggregate productivity shock. However, there is almost no difference for monetary policy shocks

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File URL: https://www.ifw-members.ifw-kiel.de/publications/capital-endogenous-separations-and-the-business-cycle/kwp-1561.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1561.

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Length: 25 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:kie:kieliw:1561
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  8. Christian Haefke & Marcus Sonntag & Thijs van Rens, 2007. "Wage rigidity and job creation," Economics Working Papers 1047, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2012.
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  17. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
  18. Shigeru Fujita & Garey Ramey, 2009. "The Cyclicality Of Separation And Job Finding Rates," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 415-430, 05.
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  22. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2005. "Unemployment and vacancy fluctuations in the matching model: inspecting the mechanism," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 19-50.
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  24. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  25. Shigeru Fujita & Garey Ramey, 2007. "Reassessing the Shimer facts," Working Papers 07-2, Federal Reserve Bank of Philadelphia.
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