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Oil and Unemployment in a New-Keynesian Model

Verónica Acurio Vásconez ()

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Abstract: The effects of oil shocks in inflation and growth have been widely discussed in the literature, however few have focused on the impact of oil price increases on unemployment. In order to shed some light on this problem, this paper develops a medium scale Dynamic Stochastic General Equilibrium model (DSGE) that allows for oil utilization in production and consumption as in Acurio-Vásconez (2015); unemployment as in Mortensen & Pissarides (1994); and staggered nominal wage contracting as in Gertler & Trigari (2009). It then analyzes the effects of oil price increases on the economy. The model recovers most of the well-known stylized facts observed after the oil shock in the 2000s'. A sensitivity analysis shows that the reduction of the bargaining power of households to negotiate wage contracts reduces the impact of an oil shock in unemployment, without affecting negatively GDP. However, it also shows that the reduction of bargaining power, together with wage flexibility strongly reduces the increase in unemployment after an oil shock, but causes a decrease in real wages, which reduces household income and affects GDP.

Keywords: New-Keynesian model; oil; Match & Search models; unemployment; modèle New-Keynésien; DSGE; pétrole; CES; modèles d'appariement; chômage (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-dge, nep-ene and nep-mac
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01167053
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Published in 2015

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Working Paper: Oil and Unemployment in a New-Keynesian Model (2015) Downloads
Working Paper: Oil and Unemployment in a New-Keynesian Model (2015) Downloads
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