EconPapers    
Economics at your fingertips  
 

Long-run Unemployment and Macroeconomic Volatility

Stefano Fasani ()

No 352, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: This paper develops a DSGE model with downward nominal wage rigidity, in which aggregate price and productivity dynamics are exogenously determined by independent Brownian motions with drift. As a result, the long-run expected value of unemployment depends positively on the drift coe¢ cients and negatively on the volatility coe¢ cients of both price and productivity growth processes. Model prescriptions are empirically tested by using a dataset including a wide sample of OECD countries from a period spanning from 1961 to 2011. Panel regressions with fixed effects and time dummies confirm the expected relation of inflation and productivity with unemployment at low frequencies. Long-run unemployment is negatively correlated with the levels of inflation and productivity growth, and positively with their volatilities.

Keywords: Long-run unemployment; Downward Nominal Wage Rigidity; Volatility; In‡ation targeting; DSGE model; Cross-country panel data (search for similar items in EconPapers)
JEL-codes: E12 E24 E31 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2016-10-18, Revised 2016-10-18
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://repec.dems.unimib.it/repec/pdf/mibwpaper352.pdf (application/pdf)

Related works:
Working Paper: Long-run Unemployment and Macroeconomic Volatility (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:352

Access Statistics for this paper

More papers in Working Papers from University of Milano-Bicocca, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Matteo Pelagatti ().

 
Page updated 2019-11-07
Handle: RePEc:mib:wpaper:352