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two members. Households face unemployment risks but their members adjust their labor supplies to insure against … unemployment. We use the model to explain the cyclical properties of aggregate employment and participation. As in the US data, the … household against unemployment risks. …
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The standard New Keynesian model suffers from the so-called .macro-micro pricing conflict: in order to match the dynamics of inflation implied by macroeconomic data, the model needs to assume an average duration of price contracts which is much longer than what is observed in micro data. Here I...
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