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Most central banks perceive a trade-off between stabilizing inflation and stabilizing the gap between output and desired output. However, the standard new Keynesian framework implies no such trade-off. In that framework, stabilizing inflation is equivalent to stabilizing the welfare-relevant...
Persistent link: https://www.econbiz.de/10013235306
We develop a utility based model of fluctuations, with nominal rigidities, and unemployment. In doing so, we combine two strands of research: the New Keynesian model with its focus on nominal rigidities, and the Diamond-Mortensen-Pissarides model, with its focus on labor market frictions and...
Persistent link: https://www.econbiz.de/10013137341
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 variable. Our approach overcomes the lack of...
Persistent link: https://www.econbiz.de/10013124549
Much recent research has focused on the development and analysis of extensions of the New Keynesian framework that model labor market frictions and unemployment explicitly. The present paper describes some of the essential ingredients and properties of those models, and their implications for...
Persistent link: https://www.econbiz.de/10013145236
The standard New Keynesian model with staggered wage setting is shown to imply a simple dynamic relation between wage inflation and unemployment. Under some assumptions, that relation takes a form similar to that found in empirical applications-starting with the original Phillips (1958)...
Persistent link: https://www.econbiz.de/10013147605
We modify the standard real business cycle model by assuming that wages are set by a monopoly union at the firm level. In the context of such a model, we introduce a measure of unemployment and analyze its equilibrium behavior. We show that a calibrated version of the model is capable of...
Persistent link: https://www.econbiz.de/10013217603
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 variable. Our approach overcomes the lack of...
Persistent link: https://www.econbiz.de/10013110597