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Unemployment, Capital and Hours: On the quantitative performance of a DSGE

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  • Philip Jung

    () (Goethe University Frankfurt)

Abstract

This paper shows that the standard Mortensen-Pissarides framework embedded in a RBC macroeconomic model with risk averse agents, capital and a labor-leisure choice has the ability to match all moments of the ac- tual US-unemployment rate and other labor market variables within tight bounds when estimated on aggregate output alone. It correctly predicts around 90% of the variation on business-cycle frequency. We describe the set of parameter values that generate these results and show that they lie in the space of commonly estimated or calibrated values in macroeconomic DSGE models. In addition we show that some wage setting arrangements like "right to manage" approaches typically employed in the literature will be unable to generate the observed fuctuations in unemployment rates and give the reason for their failure

Suggested Citation

  • Philip Jung, 2006. "Unemployment, Capital and Hours: On the quantitative performance of a DSGE," Computing in Economics and Finance 2006 123, Society for Computational Economics.
  • Handle: RePEc:sce:scecfa:123
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    Citations

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    Cited by:

    1. Holt Richard, 2008. "Job Reallocation, Unemployment and Hours in a New Keynesian Model," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-47, August.
    2. Kuester, Keith, 2007. "Real price and wage rigidities in a model with matching frictions," Working Paper Series 720, European Central Bank.
    3. Jung, Philip, 2007. "Optimal Taxation and (Female)-Labor Force Participation over the Cycle," MPRA Paper 8744, University Library of Munich, Germany, revised 13 May 2008.
    4. Makoto Nakajima, 2012. "Business Cycles In The Equilibrium Model Of Labor Market Search And Self‐Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 399-432, May.

    More about this item

    Keywords

    Unemployment;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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