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An estimated small open economy model with frictional unemployment

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This paper investigates labour market dynamics in New Zealand by estimating a structural small open economy model enriched with standard search and matching frictions in the labour market. We show that the model its the business cycle features of key macroeconomic variables reasonably well and provides an appealing monetary transmission mechanism. We then extend our analysis to understand the driving forces behind labour market variables. Our findings suggest that the bulk of variation in labour market variables is solely explained by disturbances pertaining to the labour market.

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  • Julien Albertini & Güneş Kamber & Michael Kirker, 2011. "An estimated small open economy model with frictional unemployment," Reserve Bank of New Zealand Discussion Paper Series DP2011/04, Reserve Bank of New Zealand.
  • Handle: RePEc:nzb:nzbdps:2011/04
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    Cited by:

    1. Güneş Kamber & Chris McDonald & Nicholas Sander & Konstantinos Theodoridis, 2015. "A structural model for policy analysis and forecasting: NZSIM," Reserve Bank of New Zealand Discussion Paper Series DP2015/05, Reserve Bank of New Zealand.
    2. Timo Bettendorf, 2017. "Idiosyncratic and international transmission of shocks in the G7: Does EMU matter?," Review of International Economics, Wiley Blackwell, vol. 25(4), pages 856-890, September.
    3. Funke, Michael & Kirkby, Robert & Mihaylovski, Petar, 2018. "House prices and macroprudential policy in an estimated DSGE model of New Zealand," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 152-171.
    4. Kamber, Gunes & McDonald, Chris & Sander, Nick & Theodoridis, Konstantinos, 2016. "Modelling the business cycle of a small open economy: The Reserve Bank of New Zealand's DSGE model," Economic Modelling, Elsevier, vol. 59(C), pages 546-569.
    5. Markus Kirchner & Rodrigo Tranamil, 2016. "Calvo Wages Vs. Search Frictions: a Horse Race in a DSGE Model of a Small Open Economy," Working Papers Central Bank of Chile 778, Central Bank of Chile.
    6. Xinpeng Xu & Yu Sheng, 2014. "Terms of Trade Shocks and Endogenous Search Unemployment: A Two-Sector Model with Non-Traded Goods," Pacific Economic Review, Wiley Blackwell, vol. 19(2), pages 201-215, May.
    7. Sheen, Jeffrey & Wang, Ben Zhe, 2016. "Assessing labor market frictions in a small open economy," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 231-251.
    8. Kónya, István & Jakab M., Zoltán, 2012. "Munkapiaci súrlódások DSGE modellekben [Labour market frictions in DSGE models]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 933-962.

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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