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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 ()
Additional contact information
Kai Christoffel: European Central Bank
Keith Kuester: Research Department, Federal Reserve Bank of Philadelphia

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: E31 E32 E24 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-lab and nep-mac
Date: 2009-05
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https://www.nbb.be/doc/oc/repec/reswpp/wp164en.pdf (application/pdf)

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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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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:200905-19

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