Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098942 | Journal of Economic Dynamics and Control | 2010 | 16 Pages |
Abstract
In this paper we propose a novel way to model the labor market in the context of a New-Keynesian general equilibrium model, incorporating labor market frictions in the form of hiring and firing costs. We show that such a model is able to replicate many important stylized facts of the business cycle. The reactions to monetary and real shocks become much more sluggish. Job creation and job destruction are negatively correlated. And the volatility of unemployment is much larger than in the standard search and matching model.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Wolfgang Lechthaler, Christian Merkl, Dennis J. Snower,