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17
INFLATION DYNAMICS WITH LABOUR MARKET MATCHING -- ASSESSING ALTERNATIVE SPECIFICATIONS
, 2009
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Labor Market Reform and Price Stability: an Application to the Euro
- Area’, Journal of Monetary Economics
, 2009
"... a b s t r a c t Central bankers frequently suggest that labor market reform may be beneficial for inflation management. This paper investigates this topic by simulating the effects of reductions in firing costs and unemployment benefits on inflation volatility in the Euro Area, using an estimated N ..."
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Cited by 21 (0 self)
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a b s t r a c t Central bankers frequently suggest that labor market reform may be beneficial for inflation management. This paper investigates this topic by simulating the effects of reductions in firing costs and unemployment benefits on inflation volatility in the Euro Area, using an estimated New Keynesian model with search and matching frictions. Qualitatively, changes in labor market policies alter the volatility of inflation in response to shocks, by affecting the volatility of the three components of real marginal costs (hiring costs, firing costs and wage costs). Quantitatively, we find, however, that neither policy is likely to have an important effect on inflation volatility, due to the small contribution of hiring and firing costs to inflation dynamics.
On-the-job search, sticky prices, and persistence
, 2009
"... Models of the monetary transmission mechanism often generate empirically implausible business fluctuations. This paper analyzes the role of on-the-job search in the propagation of monetary shocks in a sticky price model with labor market search frictions. Such frictions induce long-term employment r ..."
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Cited by 12 (2 self)
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Models of the monetary transmission mechanism often generate empirically implausible business fluctuations. This paper analyzes the role of on-the-job search in the propagation of monetary shocks in a sticky price model with labor market search frictions. Such frictions induce long-term employment relationships, such that the real marginal cost is determined by real wages and the cost of an employment relationship. On-the-job search opens up an extra channel of employment growth that dampens the response of these two components. Because real marginal cost rigidity induces small price adjustments, on-the-job search gives rise to a strong propagation of monetary shocks that increases output persistence.
Borrowing Constraints, Collateral Fluctuations, and the Labor Market”. mimeo
, 2011
"... Abstract This paper studies the effects of changes in collateral requirements on the cyclical properties of unemployment and job creation. I develop a general equilibrium model in which labor market frictions prevent the costless adjustment of employment. Financial frictions arise from an imperfect ..."
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Cited by 4 (0 self)
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Abstract This paper studies the effects of changes in collateral requirements on the cyclical properties of unemployment and job creation. I develop a general equilibrium model in which labor market frictions prevent the costless adjustment of employment. Financial frictions arise from an imperfect enforcement contract. An environment in which borrowing limits are linked to the firm's physical capital stock can quantitatively account for the sluggish response of labor market variables to productivity shocks. I find that fluctuations in those variables are mainly driven by changes in financial conditions. The model can explain 75% of the variation in job creation observed in the data, and it can also account for the persistent reduction in both output and leverage that follows a contraction in credit availability. JEL Classification: E24; E27; E32; E44; J63; J64.
Mismatch Shocks and Unemployment during the Great Recession
, 2012
"... We investigate the macroeconomic consequences of fluctuations in the effectiveness of the labor market matching process with a focus on the Great Recession. We conduct our analysis in the context of an estimated medium-scale DSGE model with sticky prices and equilibrium search unemployment that feat ..."
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We investigate the macroeconomic consequences of fluctuations in the effectiveness of the labor market matching process with a focus on the Great Recession. We conduct our analysis in the context of an estimated medium-scale DSGE model with sticky prices and equilibrium search unemployment that features a shock to the matching effi ciency. We find that this shock is almost irrelevant for unemployment fluctuations in normal times. However, it plays a somewhat larger role during the Great Recession when it contributes to raise the actual unemployment rate by 1.25 percentage points and the natural rate by 2 percentage points. In 2010:Q3 the natural rate of unemployment is roughly equal to 8 percent, while the size of the unemployment gap is about 1 percentage point.
Wage rigidities in an estimated dynamic, stochastic, general equilibrium model of the UK labour market
- The Manchester School
, 2013
"... We estimate a New Keynesian model with matching frictions and nominal wage rigidities on UK data. We show that in a model with matching frictions, whether nominal wage rigidities are relevant or irrelevant for inflation dynamics depends on the parametrization. At the estimated equilibrium, we find ..."
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We estimate a New Keynesian model with matching frictions and nominal wage rigidities on UK data. We show that in a model with matching frictions, whether nominal wage rigidities are relevant or irrelevant for inflation dynamics depends on the parametrization. At the estimated equilibrium, we find that wage rigidities are irrelevant, despite improving the empirical performance of the model. The reason is that with matching frictions, marginal costs depend on unit labour costs and on an additional component related to search costs. Wage rigidities affect both components in opposite ways leaving marginal costs and inflation virtually unaffected.
chon and Murat Tasci for generously sharing their data and to our discussants Federico Ravenna, James
"... We investigate the macroeconomic consequences of uctuations in the e¤ective-ness of the labor market matching process with a focus on the Great Recession. We conduct our analysis in the context of an estimated medium-scale DSGE model with sticky prices and equilibrium search unemployment that featur ..."
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We investigate the macroeconomic consequences of uctuations in the e¤ective-ness of the labor market matching process with a focus on the Great Recession. We conduct our analysis in the context of an estimated medium-scale DSGE model with sticky prices and equilibrium search unemployment that features a shock to the matching e ¢ ciency (or mismatch shock). We
nd that this shock is almost irrele-vant for unemployment uctuations in normal times. However, it plays a somewhat larger role during the Great Recession when it contributes to raise the actual un-employment rate by 1.25 percentage points and the natural rate by 2 percentage points. Moreover, it is the only shock that generates a positive conditional correla-tion between unemployment and vacancies.
Matching e ¢ ciency and business cycle uctuations
, 2012
"... er blant annet at forfatteren kan motta kommentarer fra kolleger og andre interesserte. Synspunkter og konklusjoner i arbeidene står for forfatternes regning. Working papers from Norges Bank, from 1992/1 to 2009/2 can be ordered by e-mail: ..."
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er blant annet at forfatteren kan motta kommentarer fra kolleger og andre interesserte. Synspunkter og konklusjoner i arbeidene står for forfatternes regning. Working papers from Norges Bank, from 1992/1 to 2009/2 can be ordered by e-mail:
Mismatch shocks and unemployment during the Great Recession (preliminary)
, 2012
"... We build a DSGEmodel that features nominal rigidities and search and matching frictions in the labor market. We introduce two non-standard features in the model: a shock to the e ¢ ciency of the matching function, and a generalized hiring costs function as in Yashiv (2006). We estimate the model usi ..."
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We build a DSGEmodel that features nominal rigidities and search and matching frictions in the labor market. We introduce two non-standard features in the model: a shock to the e ¢ ciency of the matching function, and a generalized hiring costs function as in Yashiv (2006). We estimate the model using Bayesian techniques and aggregate data up to 2010:Q3 on eight key macro variables, including unemployment and matching e ¢ ciency.We
nd that matching e ¢ ciency shocks are almost irrelevant for unemployment uctuations in normal times. However, they play a somewhat larger role during the Great Recession when they explain at most one percent of the increase in unemployment.These shocks are dominant drivers of the natural rate of unemployment.
