Incorporating Labour Market Frictions into an Optimising-Based Monetary Policy Model

Stéphane Moyen and Jean-Guillaume Sahuc

Working papers from Banque de France

Abstract: This paper examines the effects of introducing a non Walrasian labour market into the "New Neoclassical Synthesis'' framework. A dynamic stochastic general equilibrium model is formulated, solved, and calibrated in order to evaluate its ability to replicate the main features of the Euro area economy. This framework allows us to study the effects of labour market rigidities, nominal rigidities, and other frictions to give account of the impact of monetary policy, technology, public spending, and preference shocks. Our simulations show that: (i) real rigidities complement but do not supplant nominal rigidities, (ii) the Beveridge and Phillips relations are reproduced, (iii) hours worked are too sensitive an adjustment variable, and (iv) the real wage dynamics is still procyclical.

Keywords: DSGE models; Nominal rigidities; Real rigidities; Labour market; Endogenous persistence; Euro area (search for similar items in EconPapers)
JEL-codes: C52 E24 E32 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2004
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Citations: View citations in EconPapers (23)

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Related works:
Journal Article: Incorporating labour market frictions into an optimising-based monetary policy model (2005)
Working Paper: Incorporating Labour Market Frictions into an Optimising-Based Monetary Policy Model (2005)
Working Paper: Incorporating labour market frictions into an optimising-based monetary policy model (2005)
Working Paper: Incorporating Labour Market Frictions into an Optimizing Based Monetary Policy Model (2003)
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