Unemployment and business cycles

Lawrence Christiano, Martin Eichenbaum and Mathias Trabandt

No 1089, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We develop and estimate a general equilibrium model that accounts for key business cycle properties of macroeconomic aggregates, including labor market variables. In sharp contrast to leading New Keynesian models, wages are not subject to exogenous nominal rigidities. Instead we derive wage inertia from our specification of how firms and workers interact when negotiating wages. Our model outperforms the standard Diamond-Mortensen-Pissarides model both statistically and in terms of the plausibility of the estimated structural parameter values. Our model also outperforms an estimated sticky wage model.

Date: 2013
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Unemployment and Business Cycles (2016)
Journal Article: Unemployment and Business Cycles (2016)
Working Paper: Unemployment and Business Cycles (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1089

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