Inflation Dynamics with Labour Market Matching: Assessing Alternative Specifications
National Bank of Belgium Working Paper No. 164
57 Pages Posted: 29 Sep 2010
There are 3 versions of this paper
Inflation Dynamics with Labour Market Matching: Assessing Alternative Specifications
Inflation Dynamics with Labour Market Matching: Assessing Alternative Specifications
Inflation Dynamics with Labour Market Matching: Assessing Alternative Specifications
Date Written: May 19, 2009
Abstract
This paper reviews recent approaches to modeling the labour market, and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behavior. In a search and matching environment, we consider the following modeling setups: right-to-manage bargaining vs. efficient bargaining, wage stickiness in new and existing matches, interactions at the firm level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and endogenous job separation. We find that most specifications imply too little real rigidity and, so, too volatile inflation. Models with wage stickiness and right-to-manage bargaining or with firm-specific labour emerge as the most promising candidates.
Keywords: Inflation Dynamics, Labour Market, Business Cycle, Real Rigidities
JEL Classification: E31, E32, E24, J64
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Real Wage Rigidities and the New Keynesian Model
By Olivier J. Blanchard and Jordi Galí
-
Real Wage Rigidities and the New Keynesian Model
By Olivier J. Blanchard and Jordi Galí
-
Real Wage Rigidities and the New Keynesian Model
By Jordi Galí and Olivier J. Blanchard
-
Labor Market Search, Sticky Prices, and Interest Rate Policies
-
A New Keynesian Model with Unemployment
By Olivier J. Blanchard and Jordi Galí
-
The (Ir)Relevance of Real Wage Rigidity in the New Keynesian Model with Search Frictions
By Michael U. Krause and Thomas A. Lubik
-
Labor Markets and Monetary Policy: A New-Keynesian Model with Unemployment
By Olivier J. Blanchard and Jordi Galí