Wage Stickiness and Unemployment Fluctuations: An Alternative Approach

Miguel Casares, Antonio Moreno () and Jesús Vázquez ()
Additional contact information
Jesús Vázquez: Departamento de Fundamentos del Análisis Económico II, Universidad del País Vasco
Authors registered in the RePEc Author Service: Jesús Vázquez

No 04/09, Faculty Working Papers from School of Economics and Business Administration, University of Navarra

Abstract: Erceg, Henderson and Levin (2000, Journal of Monetary Economics) introduce sticky wages in a New-Keynesian general-equilibrium model. Alternatively, it is shown here how wage stickiness may bring unemployment fluctuations into a New-Keynesian model. Using Bayesian econometric techniques, both models are estimated with U.S. quarterly data of the Great Moderation. Estimation results are similar and provide a good empirical fit, with the crucial difference that our proposal delivers unemployment fluctuations. Thus, second-moment statistics of U.S. unemployment are replicated reasonably well in our proposed New-Keynesian model with sticky wages. In the welfare analysis, the cost of cyclical fluctuations during the Great Moderation is estimated at 0.60% of steady-state consumption.

Keywords: Wage Rigidity; Price Rigidity; Unemployment (search for similar items in EconPapers)
JEL-codes: C32 E30 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2009-08-13
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.unav.edu/documents/10174/6546776/1250169795_WP_UNAV_04_09.pdf (application/pdf)

Related works:
Journal Article: Wage stickiness and unemployment fluctuations: an alternative approach (2012)
Working Paper: Wage Stickiness and Unemployment Fluctuations: An Alternative Approach (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:una:unccee:wp0409

Access Statistics for this paper

More papers in Faculty Working Papers from School of Economics and Business Administration, University of Navarra
Bibliographic data for series maintained by ().