Inflation dynamics with labour market matching: assessing alternative specifications

Kai Christoffel, James Costain, Grégory de Walque, Keith Kuester, Tobias Linzert, Stephen Millard and Olivier Pierrard

No 1053, Working Paper Series from European Central Bank

Abstract: This paper reviews recent approaches to modelling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behaviour. In a search and matching environment, we consider the following modelling set-ups: right-to-manage bargaining vs. efficient bargaining, wage stickiness in new and existing matches, interactions at the firm level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and endogenous job separation. We find that most specifications imply too little real rigidity and, so, too volatile inflation. Models with wage stickiness and right-to-manage bargaining or with firm-specific labour emerge as the most promising candidates. JEL Classification: E31, E32, E24, J64

Keywords: business cycle; inflation dynamics; labour market; real rigidities (search for similar items in EconPapers)
Date: 2009-05
New Economics Papers: this item is included in nep-cba, nep-dge, nep-lab and nep-mac
Note: 85234
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Related works:
Working Paper: Inflation dynamics with labour market matching: assessing alternative specifcations (2009)
Working Paper: Inflation dynamics with labour market matching: assessing alternative specifications (2009)
Working Paper: Inflation dynamics with labour market matching: assessing alternative specifications (2009)
Working Paper: Inflation dynamics with labour market matching: assessing alternative specifications (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20091053

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