Galí, Jordi; Smets, Frank; Wouters, Rafael - Department of Economics and Business, Universitat … - 2011
We reformulate the Smets-Wouters (2007) framework by embedding the theory of unemployment proposed in Galí (2011a …,b). We estimate the resulting model using postwar U.S. data, while treating the unemployment rate as an additional observable … output gap. In addition, the estimated model can be used to analyze the sources of unemployment fluctuations. …
