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Inflation dynamics with labour market matching: assessing alternative specifications

Kai Christoffel, James Costain, Grégory de Walque (), Keith Kuester, Tobias Linzert, Stephen Millard () and Olivier Pierrard ()

No 09-6, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: This paper reviews recent approaches to modeling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behavior. In a search and matching environment, we consider the following modeling setups: right-to-manage bargaining vs. efficient bargaining, wage stickiness in new and existing matches, interactions at the firm level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and endogenous job separation. We find that most specifications imply too little real rigidity and, so, too volatile inflation. Models with wage stickiness and right-to-manage bargaining or with firm-specific labour emerge as the most promising candidates.

Keywords: Labor market; Business cycles (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-lab and nep-mac
Date: 2009
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Working Paper: Inflation dynamics with labour market matching: assessing alternative specifcations (2009) Downloads
Working Paper: Inflation dynamics with labour market matching: assessing alternative specifications (2009) Downloads
Working Paper: Inflation dynamics with labour market matching: assessing alternative specifications (2009) Downloads
Working Paper: Inflation dynamics with labour market matching: assessing alternative specifications (2009) Downloads
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