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What can a New Keynesian labor matching model match?

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  • Reicher, Christopher Phillip

Abstract

A labor matching model with nominal rigidities can match short-run movements in labor's share with some success. However, it cannot explain much of the behavior of employment, vacancies, and job flows in postwar US data without resorting to additional shocks beyond monetary policy and productivity shocks. In particular, the model suggests that monetary policy shocks can account for only a small portion of postwar fluctuations, except for the Volcker and late-1940s episodes. Productivity shocks can account for some of the pattern in labor's share and in employment between the late 1960s and the early 1980s. Based on the timing of observed fluctuations in interest rates, inflation, and productivity, it appears that the vast majority of observed fluctuations in the real economy remain unexplained by standard real and nominal shocks.

Suggested Citation

  • Reicher, Christopher Phillip, 2009. "What can a New Keynesian labor matching model match?," Kiel Working Papers 1496, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwkwp:1496
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment; labor market search; job flows; labor share; inflation; productivity shocks; monetary shocks;

    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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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