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An Estimated New-Keynesian Model with Unemployment as Excess Supply of Labor

WPnull/12 An Estimated New-Keynesian Model with Unemployment as Excess Supply of Labor
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Abstract
Wage stickiness is incorporated to a New-Keynesian model with variable capital in a way that generates endogenous unemployment fluctuations as the log difference between aggregate labor supply and aggregate labor demand. After estimation with U.S. data, the implied second-moment statistics of the unemployment rate provide a reasonable match with those observed in the data. Our results also show that wage-push shocks, demand shifts and monetary policy shocks are the three major determinants of unemployment fluctuations. Compared to an estimated canonical DSGE model without unemployment: wage stickiness is higher, labor supply elasticity is lower, the slope of the New-Keynesian Phillips curve is flatter, and the importance of technology innovations on output growth variability increases.

Classification JEL:C32, E30.

Keywords:sticky wages, unemployment, business cycles, New-Keynesian models.

Number of Pages:47

Creation Date:2012-07-30

Number:null/12

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Raúl Bajo

Raúl Bajo

Campus Universitario

31009 Pamplona, España

+34 948 42 56 00

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