Search Unemployment in a Dynamic New Keynesian Model of the Business Cycle

Rafael Gerke and Jens Rubart ()

No 119, Darmstadt Discussion Papers in Economics from Darmstadt University of Technology, Department of Law and Economics

Abstract: The monetary transmission mechanism plays an important role in studying the effects of monetary policy on the real side of the economy. At least since Chari et al. (2000) it is generally accepted that new keynesian models of the business cycle display a persistence problem. In this paper, we follow the approach of Walsh (2002) and include search unemployment in a dynamic new keynesian model of the business cycle in order to study the effects of a monetary shock. After deriving the equilibrium solution of the model, we study the behavior of the impulse response functions due to a monetary shock. To complete our analysis we confront the results of our simulation to time series data for the U.S., U.K. and Germany. Our main result is that the introduction of search unemployment does improve the capability of the model to reproduce some stylized facts of the monetary transmission mechanism, however to a less extent than expected.

Keywords: Search Unemployment; Monetary Shocks; Business Cycles (search for similar items in EconPapers)
JEL-codes: E24 E32 J40 J63 (search for similar items in EconPapers)
Date: 2003
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Related works:
Working Paper: Search Unemployment in a Dynamic New Keynesian Model of the Business Cycle (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:darddp:dar_37308

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