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Reallocation shocks, persistence and nominal rigidities

Francesco Furlanetto () and Nicolas Groshenny

Economics Letters, 2016, vol. 141, issue C, 151-155

Abstract: We reconsider the role of reallocation shocks in a simple New Keynesian model with search and matching frictions. The sign of the conditional correlation between unemployment and vacancies depends on the degree of price rigidity and on the persistence of the shock. Therefore, a non negligible role for reallocation shocks in driving business cycle fluctuations cannot be ruled out on theoretical grounds.

Keywords: Search and matching frictions; Matching efficiency; Reallocation shocks (search for similar items in EconPapers)
JEL-codes: E32 C51 C52 (search for similar items in EconPapers)
Date: 2016
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