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A Keynesian Dynamic Stochastic Labor-Market Disequilibrium model for business cycle analysis

Christian Schoder

No 157-2015, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: A Dynamic Stochastic Labor-Market Disequilibrium (DSLMD) model is proposed for Keynesian business cycle analysis. It shares the type of micro-foundation known from neoclassical Dynamic Stochastic General Equilibrium (DSGE) models but characterizes economic mechanisms consistent with Traditional Post-Keynesian (TPK) models. Wage inflation is perceived as a non-market-clearing policy variable which may be subject to a collective Nash bargaining process with the state of the labor market affecting the relative bargaining power. The core insights are twofold: First, apart from assumptions regarding expectation formation, the DSGE-type of microfoundation is, to a considerable extent, consistent with the behavioral hypotheses underlying TPK models. Second, the economy characterized by the DSLMD model is post-Keynesian rather than neoclassical.

Keywords: Dynamic stochastic labor-market disequilibrium; dynamic stochastic general equilibrium; post-Keynesian economics; micro-foundations (search for similar items in EconPapers)
JEL-codes: B41 E12 J52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-lab, nep-mac and nep-pke
Date: 2015
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