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Business cycle with nominal contracts and search frictions

  • Moon, Weh-Sol
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    This paper examines a dynamic stochastic general equilibrium (DSGE) model containing exible prices, search frictions and nominal wage contracts. It is assumed that the nominal hourly wage rate and the hours of work are jointly determined, so-called efficient bargaining, for each period. The frictional labor markets reasonably reflect the volatility of real variables and the fact that productivity is no longer countercyclical. As contract length increases, the volatilities of the unemployment rate and the vacancy rate increase sharply, but those of output and total hours worked do not appreciably change.

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    File URL: http://mpra.ub.uni-muenchen.de/31716/1/MPRA_paper_31716.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31716.

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    Date of creation: 20 Jun 2011
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    Handle: RePEc:pra:mprapa:31716
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    7. Luca Sala & Antonella Trigari & Mark Gertler, 2007. "An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining," 2007 Meeting Papers 353, Society for Economic Dynamics.
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    10. Cho, Jang-Ok & Cooley, Thomas F & Phaneuf, Louis, 1997. "The Welfare Cost of Nominal Wage Contracting," Review of Economic Studies, Wiley Blackwell, vol. 64(3), pages 465-84, July.
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    21. Faia, Ester, 2008. "Comments on: "Search and matching frictions and optimal monetary policy"," Journal of Monetary Economics, Elsevier, vol. 55(5), pages 957-960, July.
    22. Zuzana Janko, 2008. "Nominal Wage Contracts, Labor Adjustment Costs and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 434-448, April.
    23. Christoffel, Kai & Kuester, Keith, 2008. "Resuscitating the wage channel in models with unemployment fluctuations," Working Paper Series 0923, European Central Bank.
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    28. Kai Christoffel & James Costain & Gregory de Walque & Keith Kuester & Tobias Linzert & Stephen Millard & Olivier Pierrard, 2009. "Wage, inflation and employment dynamics with labour market matching," Banco de Espa�a Working Papers 0918, Banco de Espa�a.
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