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