An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining

61 Pages Posted: 1 Sep 2008

See all articles by Mark Gertler

Mark Gertler

New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Antonella Trigari

Bocconi University - Department of Economics

Luca Sala

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER)

Date Written: September 2008

Abstract

We develop and estimate a medium scale macroeconomic model that allows for unemployment and staggered nominal wage contracting. In contrast to most existing quantitative models, employment adjustment is on the extensive margain and the employment of existing workers is efficient. Wage rigidity, however, affects the hiring of new workers. The former is introduced via the staggered Nash bargaining setup of Gertler and Trigari (2006). A robust finding is that the model with wage rigidity provides a better description of the data than does a flexible wage version. Overall, the model fits the data roughly as well as existing quantitative macroeconomic models, such as Smets and Wouters (2007) or Christiano, Eichenbaum and Evans (2005). More work is necessary, however, to ensure a robust identification of the key labor market parameters.

Suggested Citation

Gertler, Mark and Trigari, Antonella and Sala, Luca, An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining (September 2008). Paolo Baffi Centre Research Paper Series No. 2008-24. Available at SSRN: https://ssrn.com/abstract=1261794 or http://dx.doi.org/10.2139/ssrn.1261794

Mark Gertler (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

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Antonella Trigari

Bocconi University - Department of Economics ( email )

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Luca Sala

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER) ( email )

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Italy
+39 02 5836 3326 (Phone)

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