Involuntary Unemployment and the Business Cycle

Lawrence Christiano, Mathias Trabrandt () and Karl Walentin
Additional contact information
Mathias Trabrandt: European Central Bank, Postal: Fiscal Policies Division, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
Authors registered in the RePEc Author Service: Mathias Trabandt

No 238, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: Can a model with limited labor market insurance explain standard macro- and labor market data jointly? We seek to 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 New Keynesian framework with no capital. 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.

Keywords: DSGE; unemployment; labor force participation; business cycles; monetary policy; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E20 E30 E50 J20 J60 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2010-04-01, Revised 2012-06-01
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 (13)

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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 (2010)
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:hhs:rbnkwp:0238

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