Involuntary Unemployment and the Business Cycle

Mathias Trabandt, Karl Walentin and Lawrence Christiano

No 129, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: We propose a model in which unemployed people satisfy three conditions: (i) they are making efforts to find work, (ii) they are ready and able to work and (iii) they would be better off if they find a job than if they do not. A person who satisfies (i) and (ii) meets the US Bureau of Labor Statistics' definition of unemployment. We integrate our model into the simple New Keynesian framework with no capital and show that the result is a general equilibrium interpretation of the NAIRU. We integrate the model into a medium sized DSGE model with capital and show that the resulting model does as well as existing models at accounting for the response of standard macroeconomic variables to monetary policy and two technology shocks.

Date: 2010
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Related works:
Journal Article: Involuntary Unemployment and the Business Cycle (2021)
Working Paper: Involuntary Unemployment and the Business Cycle (2016)
Working Paper: Involuntary Unemployment and the Business Cycle (2012)
Working Paper: Involuntary unemployment and the business cycle (2010)
Working Paper: Involuntary unemployment and the business cycle (2010)
Working Paper: Involuntary Unemployment and the Business Cycle (2010)
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