Nominal Wage Contracts, Search Frictions and the Macroeconomy (in Korean)

Weh-Sol Moon

Economic Analysis (Quarterly), 2015, vol. 21, issue 1, 65-100

Abstract: I construct a dynamic stochastic general equilibrium (DSGE) model characterized by money and flexible price in which search frictions and nominal wage contracts are considered. In the model, firms and workers enter into bargaining over the future nominal wage rate. Worker-firm pairs are subject to aggregate productivity shocks, money growth rate shocks, and idiosyncratic shocks. I examine to what extent the model can explain the business cycle properties of macroeconomic variables in the Korean economy. I find that the model economy with two- or three-period contracts comes close to accounting for the relative volatilities and comovements of the key macroeconomic variables.

Keywords: Business cycle; Search frictions; Nominal contracts (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:bok:journl:v:21:y:2015:i:1:p:65-100

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