Monetary Shocks in a Model with Loss of Skills (Revised in February 2009)

Julen Esteban-Pretel and Elisa Faraglia

No CARF-F-053, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: This paper studies the effects of a monetary shock on real and nominal variables, such as output, inflation and especially unemployment, within a framework which combines a New Keynesian business cycle model model with microfounded labor market in the style of the search and matching literature. We assume that unemployed workers can lose their skill over time and show that this mechanism helps explain the slugish response of unemployment to monetary shocks observed in the data, while also replicating the behavior of output, inflation and employment.

Pages: 34 pages
Date: 2005-10
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Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf053

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