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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 164, Working Paper Research from National Bank of Belgium

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: Inflation Dynamics; Labour Market; Business Cycle; Real Rigidities (search for similar items in EconPapers)
JEL-codes: E24 E31 E32 J64 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2009-05
New Economics Papers: this item is included in nep-cba, nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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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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