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Instability and indeterminacy in a simple search and matching model

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  • Krause, Michael
  • Lubik, Thomas A.

Abstract

We demonstrate the possibility of indeterminacy and non-existence of equilibrium dynamics in a standard business cycle model with search and matching frictions in the labor market. Our results arise for empirically plausible parametrizations and do not rely upon a mechanism such as increasing returns.

Suggested Citation

  • Krause, Michael & Lubik, Thomas A., 2010. "Instability and indeterminacy in a simple search and matching model," Discussion Paper Series 1: Economic Studies 2010,25, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp1:201025
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    References listed on IDEAS

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    1. repec:wop:calsdi:97-23 is not listed on IDEAS
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    5. Krause, Michael U. & Lubik, Thomas A., 2007. "The (ir)relevance of real wage rigidity in the New Keynesian model with search frictions," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 706-727, April.
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    Cited by:

    1. Maarten Dossche & Andrea Gavazzi & Vivien Lewis, 2023. "Labor Adjustment and Productivity in the OECD," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 47, pages 111-130, January.
    2. Francesco Furlanetto & Nicolas Groshenny, 2012. "Matching efficiency and business cycle fluctuations," Working Paper 2012/07, Norges Bank.
    3. Daisy J. Huang & Charles Ka Yui Leung & Chung-Yi Tse, 2018. "What Accounts for the Differences in Rent-Price Ratio and Turnover Rate? A Search-and-Matching Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 57(3), pages 431-475, October.
    4. Matthias S. Hertweck & Vivien Lewis & Stefania Villa, 2021. "Going the Extra Mile: Effort by Workers and Job‐Seekers," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(8), pages 2099-2127, December.
    5. Nika Lazaryan & Thomas A. Lubik, 2019. "Global dynamics in a search and matching model of the labor market," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(2), pages 461-497, September.
    6. Marco Guerrazzi, 2016. "Increasing Returns in Matching and Labour Market Dynamics: Comments on Indeterminacy and Search Theory," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 15(1), pages 85-88, June.
    7. Kazuo Mino, 2017. "Sunspot-Driven Business Cycles: An Overview," KIER Working Papers 973, Kyoto University, Institute of Economic Research.
    8. Marczak, Martyna & Beissinger, Thomas & Brall, Franziska, 2022. "Technical change, task allocation, and labor unions," Hohenheim Discussion Papers in Business, Economics and Social Sciences 05-2022, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    9. Chu, Angus C. & Liao, Chih-Hsing & Liu, Xiangbo & Zhang, Mengbo, 2021. "Indeterminacy in a matching model of money with productive government expenditure," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 497-516.
    10. Morris, Stephen D., 2017. "DSGE pileups," Journal of Economic Dynamics and Control, Elsevier, vol. 74(C), pages 56-86.

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    More about this item

    Keywords

    search and matching; indeterminacy; match elasticity;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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