Involuntary unemployment and the business cycle

Lawrence Christiano, Mathias Trabrandt and Karl Walentin
Authors registered in the RePEc Author Service: Mathias Trabandt

No 1202, Working Paper Series from European Central Bank

Abstract: Can a model with limited labor market insurance explain standard macro and labor market data jointly? We construct a monetary model in which: i) the unemployed are worse off than the employed, i.e. unemployment is involuntary and ii) the labor force participation rate varies with the business cycle. To illustrate key features of our model, we start with the simplest possible framework. We then integrate the model into a medium-sized DSGE model and show that the resulting model does as well as existing models at accounting for the response of standard macroeconomic variables to monetary policy shocks and two technology shocks. In addition, the model does well at accounting for the response of the labor force and unemployment rate to these three shocks. JEL Classification: E2, E3, E5, J2, J6

Keywords: Bayesian estimation; business cycles; DSGE; labor force participation; monetary policy; unemployment (search for similar items in EconPapers)
Date: 2010-06
New Economics Papers: this item is included in nep-cba, nep-dge, nep-lab and nep-mac
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Citations: View citations in EconPapers (52)

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Related works:
Journal Article: Involuntary Unemployment and the Business Cycle (2021)
Working Paper: Involuntary Unemployment and the Business Cycle (2016)
Working Paper: Involuntary Unemployment and the Business Cycle (2012)
Working Paper: Involuntary unemployment and the business cycle (2010)
Working Paper: Involuntary Unemployment and the Business Cycle (2010)
Working Paper: Involuntary Unemployment and the Business Cycle (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20101202

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