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Search Theories and Aggregate Demand

Annalisa Cristini, Piero Ferri () and Anna Maria Variato ()
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Piero Ferri: Department of Management, Economics and Quantitative Methods, University of Bergamo Via dei Caniana 2, 24126 Bergamo, ITALY
Anna Maria Variato: Department of Management, Economics and Quantitative Methods, University of Bergamo Via dei Caniana 2, 24126 Bergamo, ITALY

Review of Economics & Finance, 2015, vol. 5, 55-65

Abstract: This paper analyzes search models within a framework of aggregate demand shocks and dominated by uncertainty. In this context, agents are bounded rational while wages are determined by some markup mechanism. Differently from the canonical search theories, unemployment is not only frictional but it can be dynamically determined by an unexpected fall in aggregate demand. Furthermore, by introducing stochastic productivity heterogeneity, a ¡°systemic unemployment¡±, due to both demand and supply aspects, can be generated. The model is cast in dynamic terms, while the main results are obtained by means of simulations.

Keywords: Search theories; Different types of unemployment; Nonlinearity; Bounded rationality; Simulations (search for similar items in EconPapers)
JEL-codes: D83 C15 E24 E32 J63 J64 C15 (search for similar items in EconPapers)
Date: 2015
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