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

  • 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
Date of revision:
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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