Unemployment in an Estimated New Keynesian Model

Frank Smets, Raf Wouters and Jordi Galí
Authors registered in the RePEc Author Service: Jordi Galí

No 541, Working Papers from Barcelona School of Economics

Abstract: Revised May 2011We develop a reformulated version of the Smets-Wouters (2007) framework that embeds the theory of unemployment proposed in Galí (2011a,b). We estimate the resulting model using postwar U.S. data, while treating the unemployment rate as an additional observable variable. Our approach overcomes the lack of identifification of wage markup and labor supply shocks highlighted by Chari, Kehoe and McGrattan (2008) in their criticism of New Keynesian models, and allows us to estimate a "correct" measure of the output gap. In addition, the estimated model can be used to analyze the sources of unemployment fluctuations.

Keywords: unemployment fluctuations; Phillips curve; Nominal rigidities; wage markups shocks; output gap (search for similar items in EconPapers)
JEL-codes: D58 E24 E31 E32 (search for similar items in EconPapers)
Date: 2015-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (221)

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Related works:
Journal Article: Unemployment in an Estimated New Keynesian Model (2012)
Working Paper: Unemployment in an Estimated New Keynesian Model (2012)
Chapter: Unemployment in an Estimated New Keynesian Model (2011)
Working Paper: Unemployment in an Estimated New Keynesian Model (2011)
Working Paper: Unemployment in an Estimated New Keynesian Model (2011)
Working Paper: Unemployment in an Estimated New Keynesian model (2011)
Working Paper: Unemployment in an estimated new Keynesian model (2011)
Working Paper: Unemployment in an Estimated New Keynesian Model (2010)
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