The Business Cycle with Nominal Contracts and Search Frictions

Weh-Sol Moon

MPRA Paper from University Library of Munich, Germany

Abstract: Macroeconomic models of the economy with rigid wage structures tend to predict unrealistically volatile labor hours and countercyclical productivity. This study extends the Cho--Cooley model by incorporating labor market frictions and efficient bargaining as an alternative contracting scheme in which contracts are forward looking and specify labor hours and wage rates. By accounting for search frictions and realistic contractual schemes, the extended model overcomes two counterfactual predictions: (1) excess volatility of employment and output and (2) countercyclical productivity.

Keywords: Business Cycles; Search Frictions; Nominal Wage Contracts; Efficient Bargaining (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Date: 2016-07-21
New Economics Papers: this item is included in nep-dge and nep-mac
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https://mpra.ub.uni-muenchen.de/72666/16/MPRA_paper_72666.pdf original version (application/pdf)

Related works:
Journal Article: THE BUSINESS CYCLE WITH NOMINAL CONTRACTS AND SEARCH FRICTIONS (2018)
Working Paper: The Business Cycle with Nominal Contracts and Search Frictions (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:72666

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