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Quadratic labor adjustment costs and the New-Keynesian model

Author

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  • Lechthaler, Wolfgang
  • Snower, Dennis J.

Abstract

We build quadratic labor adjustment costs into an otherwise standard New-Keynesian model of the business cycle and show that this is sufficient to increase both, output and inflation persistence.

Suggested Citation

  • Lechthaler, Wolfgang & Snower, Dennis J., 2008. "Quadratic labor adjustment costs and the New-Keynesian model," Kiel Working Papers 1453, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwkwp:1453
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    File URL: https://www.econstor.eu/bitstream/10419/24847/1/579118363.PDF
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    References listed on IDEAS

    as
    1. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    2. Lechthaler, Wolfgang & Merkl, Christian & Snower, Dennis J., 2010. "Monetary persistence and the labor market: A new perspective," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 968-983, May.
    3. Christoffel, Kai & Linzert, Tobias, 2005. "The Role of Real Wage Rigidity and Labor Market Frictions for Unemployment and Inflation Dynamics," IZA Discussion Papers 1896, Institute for the Study of Labor (IZA).
    4. Trigari, Antonella, 2004. "Equilibrium unemployment, job flows and inflation dynamics," Working Paper Series 304, European Central Bank.
    5. Christoffel, Kai & Linzert, Tobias, 2005. "The role of real wage rigidity and labor market frictions for unemployment and inflation dynamics," Working Paper Series 556, European Central Bank.
    6. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
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    Cited by:

    1. Vogel, Lukas, 2011. "Interacting nominal and real labour market rigidities," Economics Letters, Elsevier, vol. 111(3), pages 264-267, June.

    More about this item

    Keywords

    monetary persistence; labor adjustment costs;

    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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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