Inflation dynamics with labour market matching: assessing alternative specifcations

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

No 38, BCL working papers from Central Bank of Luxembourg

Abstract: This paper reviews recent approaches to modeling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behavior. In a search and matching environment, we consider the following modeling setups: 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.

Keywords: Inflation Dynamics; Labour Market; Business Cycle; Real Rigidities (search for similar items in EconPapers)
JEL-codes: E24 E31 E32 J64 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2009-05
References: Add references at CitEc
Citations: View citations in EconPapers (17)

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https://www.bcl.lu/fr/Recherche/publications/cahiers_etudes/38/BCLWP038.pdf (application/pdf)

Related works:
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)
Working Paper: Inflation dynamics with labour market matching: assessing alternative specifications (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bcl:bclwop:bclwp038

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