Long-run Unemployment and Macroeconomic Volatility
Stefano Fasani ()
No 408, CEIS Research Paper from Tor Vergata University, CEIS
This paper develops a DSGE model with downward nominal wage rigidity, in which aggregate price and productivity dynamics are exogenously determined by independent Brownian motions with drift. As a result, the long-run expected value of unemployment depends positively on the drift coe¢ cients and negatively on the volatility coe¢ cients of both price and productivity growth processes. Model prescriptions are empirically tested by using a dataset including a wide sample of OECD countries from a period spanning from 1961 to 2011. Panel regressions with fixed effects and time dummies confirm the expected relation of inflation and productivity with unemployment at low frequencies. Long-run unemployment is negatively correlated with the levels of inflation and productivity growth, and positively with their volatilities.
Keywords: Long-run unemployment; Downward Nominal Wage Rigidity; Volatility; Inflationation targeting; DSGE model; Cross-country panel data. (search for similar items in EconPapers)
JEL-codes: E12 E24 E31 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2017-07-10, Revised 2017-07-10
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
ftp://www.ceistorvergata.it/repec/rpaper/RP408.pdf Main text (application/pdf)
Working Paper: Long-run Unemployment and Macroeconomic Volatility (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:rtv:ceisrp:408
Ordering information: This working paper can be ordered from
CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
Access Statistics for this paper
More papers in CEIS Research Paper from Tor Vergata University, CEIS CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma. Contact information at EDIRC.
Bibliographic data for series maintained by Barbara Piazzi ().