Business cycle with nominal contracts and search frictions

Weh-Sol Moon

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines a dynamic stochastic general equilibrium (DSGE) model containing exible prices, search frictions and nominal wage contracts. It is assumed that the nominal hourly wage rate and the hours of work are jointly determined, so-called efficient bargaining, for each period. The frictional labor markets reasonably reflect the volatility of real variables and the fact that productivity is no longer countercyclical. As contract length increases, the volatilities of the unemployment rate and the vacancy rate increase sharply, but those of output and total hours worked do not appreciably change.

Keywords: Business Cycles; Labor Market Frictions; Nominal Wage Contracts (search for similar items in EconPapers)
JEL-codes: E24 E32 J41 J64 (search for similar items in EconPapers)
Date: 2011-06-20
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:31716

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