Unemployment, Capital and Hours: On the quantitative performance of a DSGE
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
|Date of creation:||04 Jul 2006|
|Date of revision:|
|Contact details of provider:|| Web page: http://comp-econ.org/|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:sce:scecfa:123. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.