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An Estimated New-Keynesian Model with Unemployment as Excess Supply of Labor

Listed author(s):
  • Miguel Casares

    ()

    (Departamento de Economía, Universidad Pública de Navarra)

  • Antonio Moreno

    ()

    (Departamento de Economía, Universidad de Navarra)

  • Jesús Vázquez

    ()

    (Departamento FAE II, Universidad del País Vasco)

Wage stickiness is incorporated to a New-Keynesian model with variable capital in a way that generates endogenous unemployment fluctuations as the log difference between aggregate labor supply and aggregate labor demand. After estimation with U.S. data, the implied second-moment statistics of the unemployment rate provide a reasonable match with those observed in the data. Our results also show that wage-push shocks, demand shifts and monetary policy shocks are the three major determinants of unemployment fluctuations. Compared to an estimated canonical DSGE model without unemployment: wage stickiness is higher, labor supply elasticity is lower, the slope of the New-Keynesian Phillips curve is flatter, and the importance of technology innovations on output growth variability increases.

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File URL: http://www.unav.edu/documents/10174/6546776/1343664292_WP_UNAV_01_12.pdf
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Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 01/12.

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Length: 47 pages
Date of creation: 30 Jul 2012
Handle: RePEc:una:unccee:wp0112
Contact details of provider: Web page: http://www.unav.edu/web/facultad-de-ciencias-economicas-y-empresariales

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  6. Galí, Jordi & Smets, Frank & Wouters, Rafael, 2011. "Unemployment in an Estimated New Keynesian Model," CEPR Discussion Papers 8401, C.E.P.R. Discussion Papers.
  7. Frank Smets & Raf Wouters, 2007. "Shocks and Frictions in US Business Cycles : a Bayesian DSGE Approach," Working Paper Research 109, National Bank of Belgium.
  8. Andrew Levin & Christopher J. Erceg & Dale W. Henderson, 1999. "Optimal Monetary Policy with Staggered Wage and Price Contracts," Computing in Economics and Finance 1999 1151, Society for Computational Economics.
  9. Kimball, Miles S, 1995. "The Quantitative Analytics of the Basic Neomonetarist Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1241-1277, November.
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  11. Miguel Casares, 2007. "Firm-Specific or Household-Specific Sticky Wages in the New Keynesian Model?," International Journal of Central Banking, International Journal of Central Banking, vol. 3(4), pages 181-240, December.
  12. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research 35, National Bank of Belgium.
  13. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper 0107, Federal Reserve Bank of Cleveland.
  14. Cho, Jang-Ok & Cooley, Thomas F., 1994. "Employment and hours over the business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 18(2), pages 411-432, March.
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  16. Antonio Moreno, 2003. "Reaching Inflation Stability," Faculty Working Papers 13/03, School of Economics and Business Administration, University of Navarra.
  17. Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2011. "Is there a trade-off between inflation and output stabilization?," NBER Working Papers 17071, National Bureau of Economic Research, Inc.
  18. Bénassy, Jean-Pascal, 1993. "Money and wage contracts in an optimizing model of the business cycle," CEPREMAP Working Papers (Couverture Orange) 9325, CEPREMAP.
  19. Miguel Casares & Antonio Moreno & Jesús Vázquez, 2009. "Wage Stickiness and Unemployment Fluctuations: An Alternative Approach," Faculty Working Papers 04/09, School of Economics and Business Administration, University of Navarra.
  20. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
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  23. Pascal Michaillat, 2010. "Do Matching Frictions Explain Unemployment? Not in Bad Times," CEP Discussion Papers dp1024, Centre for Economic Performance, LSE.
  24. 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.
  25. Casares, Miguel, 2010. "Unemployment as excess supply of labor: Implications for wage and price inflation," Journal of Monetary Economics, Elsevier, vol. 57(2), pages 233-243, March.
  26. Champagne, Julien & Kurmann, André, 2013. "The great increase in relative wage volatility in the United States," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 166-183.
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