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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.es/facultad/econom/files/workingpapersmodule/@random50169a3d22927/1343664292_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.es/facultad/econom

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  1. Christiano, Lawrence & Trabandt, Mathias & Walentin, Karl, 2010. "Involuntary unemployment and the business cycle," Working Paper Series 1202, European Central Bank.
  2. Jordi Galí & Frank Smets & Rafael Wouters, 2012. "Unemployment in an Estimated New Keynesian Model," National Bank of Poland Working Papers 106, National Bank of Poland, Economic Institute.
  3. Miguel Casares & Antonio Moreno & Jesús Vázquez, 2009. "Wage Stickiness and Unemployment Fluctuations: An Alternative Approach," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 0902, Departamento de Economía - Universidad Pública de Navarra.
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  6. Antonio Moreno, 2004. "Reaching Inflation Stability," Econometric Society 2004 North American Summer Meetings 269, Econometric Society.
  7. 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.
  8. James H. Stock & Mark W. Watson, 2002. "Has the Business Cycle Changed and Why?," NBER Working Papers 9127, National Bureau of Economic Research, Inc.
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  13. 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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  18. Giorgio Primiceri & Andrea Tambalotti & Alejandro Justiniano, 2011. "Is there a trade-off between inflation and output stabilization?," 2011 Meeting Papers 280, Society for Economic Dynamics.
  19. 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.
  20. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper 0107, Federal Reserve Bank of Cleveland.
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  26. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research 35, National Bank of Belgium.
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