Incorporating Labour Market Frictions into an Optimizing Based Monetary Policy Model

Stéphane Moyen and Jean-Guillaume Sahuc

No 03-03, Documents de recherche from Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne

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 to evaluate its abilities to replicate the main features of the Euro area economy. This framework allows the respective roles of labour market rigidities, nominal rigidities, and policy inertia in accounting for the impact of monetary policy, technology, public spending and preference shocks to be studied. Our simulations show that: (i) real rigidities complement but not supplant nominal rigidities, (ii) the Beveridge and Phillips relations are reproduced, (iii) hours worked are a too crucial adjustment variable and (iv) the real wage dynamics is still procyclical.

Keywords: DSGE models; nominal rigidities; real rigidities; labour market search; endogenous persistence; euro area (search for similar items in EconPapers)
JEL-codes: C52 E24 E52 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2003
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Citations: View citations in EconPapers (1)

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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 Optimising-Based Monetary Policy Model (2004)
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